In the last couple of weeks, I've written about how the economy is affecting CFO responsibilities, how it could affect audit firms, and how it will impact the nation's biggest banks -- at least in terms of regulatory review. In the November issue of Metropolitan Corporate Counsel, three partners at the law firm of K&L Gates write about how the credit crisis should be affecting corporate audit committees.
Michael Greco, Michael Missal and Robert Lawton note that Sarbanes-Oxley and related Securities and Exchange Commission rules gave audit committees increased authority and additional responsibilities, including risk management oversight. Such oversight includes assessment of all kinds of risk -- catastrophic and financial as well as reputational.
Best practices currently require audit committees to investigate risk exposure and make sure that company regulatory filings "adequately reflect that exposure," according to the authors. The committees do so with internal audits, third-party audits, and even outside attorneys or advisors when necessary.
They conclude that the credit crisis will undoubtedly expand the role and importance of audit committees even further. "Audit committees need to be independent and must review management decisions with healthy skepticism," they say.
Especially when it comes to risk management practices.