Insight

Emphasizing continuous improvement for the audit committee

​The AC chair should help ensure that the committee is "moving the ball forward" through education and self-assessment.

AC chairs recognize that AC effectiveness is an evolving process that requires staying abreast of fast-changing business developments so that the AC has the knowledge needed to evaluate the information it receives and on which it is basing its decisions.

  • The AC chair should consider the need for focused education and development programs on company-specific issues to help keep the committee’s skills sharp, whether through external training or events or presentations by subject matter experts during committee meetings.
  • The AC chair needs to monitor whether the AC is improving. How do you know the committee is “moving the ball forward”?
  • In addition to education, the AC’s self-assessment process is critical to its continuous improvement. As noted in the 2017 KPMG Board Leadership Center publication, Enhancing evaluations for boards, committees, and directors, a strong evaluation of the committee and individual members begins with a process designed to facilitate an “honest, constructive, and insightful assessment of strengths, weaknesses, and gaps that leads to meaningful follow-up. Evaluations may be performed in a variety of ways, and there is no one ‘right’ way to do them.” The 2016 Report of the NACD Blue Ribbon Commission on Building the Strategic-Asset Board recommends that committee evaluations be conducted at least every other year, and companies listed on the New York Stock Exchange are required to perform an annual evaluation of the AC.
  • The lead director can help address performance issues at the committee and individual director level.
  • The AC chair plays a key role in conducting the self-assessment and must assume ownership for the process.
  • Possible approaches include:
    • Decide on the purpose and scope of the evaluation—what do we want to accomplish?
    • Bring appropriate rigor to the process
    • What areas do we need to focus on, such as key audit committee oversight processes?
    • How can we receive valid feedback?
    • How can we act on the feedback to make a difference?
  • Involve the necessary resources up front.
    • Where can we find necessary expertise, internally and externally?
    • Who should handle, analyze, and provide feedback to the AC?
    • Integrate/coordinate AC self-assessment withthose of board and other committees.

Explore all topics in the Role of the Audit Committee Chair report


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