FEI – Audit committee relationships key to success

FEI Daily reports from the Current Financial Reporting Issues Conference (CFRI) that audit committee members and audit committee chairs want and need more and better communication from finance managers and executives at their company.

“I talk with the chief accounting officer or head of internal audit on a monthly basis,” Cyprus said. “I don’t want to wait for a quarterly basis. We’ll talk about what’s changed, and what’s going on. If something comes to my attention that I think is significant, I’ll put it on the agenda of the next committee meeting. Or, if it’s really important, we can pick up the phone and have an audit committee call.”

Several panelists stressed the need for ongoing communications and consistent updates.

“What I don’t want to see is, every quarter, the same critical accounting estimates,” Seidman said. “I want to see issues, past or brewing, and we can decide whether they’re critical because we might have different points of view about the level of judgment that’s required.”

Ultimately the key to effectiveness is in the soft skill area. Particularly building relationships

“Relationships count, and from the standpoint of the chair, you need relationships with the Controller, the CFO, the CEO, and the internal auditor,” Franklin said. “The communication needs to flow, and it needs to flow between meetings, not just during meetings or if there’s a crisis. You need to build relationships, and an alert chairman needs to know what’s being said by the controller, and not being said, and where questions need to be asked.”

The only thing we would add is that relationships with the external auditors are just as critical.