A wave of new regulations, including the many requirements spawned by Dodd-Frank, mean directors who serve on the audit committees of corporate boards have a lot to think about as they start the new year. PricewaterhouseCoopers says the issues audit committee members should be asking about this year include the Dodd-Frank whistleblower provision, new regulations on uncertain tax provisions, and the convergence of U.S. and international accounting standards.
"In terms of new challenges, some of the biggest are the ones related to some of the changes we did see in 2010, including the Dodd-Frank Act," says Catherine Bromilow, a partner in PricewaterhouseCooper's Center for Board Governance.
Bromilow notes the complexity of some new requirements, such as disclosing how the CEO's compensation compares with the median compensation for all company employees. As companies wait for final rules on this requirement, they are wondering whether they should include part-time workers, thinking about the complexities of gathering data on staff in many countries and many different payroll systems, and considering how to deal with employees who live in countries with government-provided healthcare, she says.
The Dodd-Frank whistleblower provision has raised concerns that it could undermine companies' internal compliance programs. Bromilow says she's encouraging directors and audit committees to emphasize "the tone at the top."
Directors and audit companies should encourage management "to reinforce with employees that the company does want to run in an ethical manner, and really encourage employees if you see something wrong, do let us know, because we want to do something to fix it," she says.
PwC also recommends that audit committees take a look at the extent to which the company is commenting on relevant regulatory changes.
"There are just so many phenomenal things that are happening, developments that are really going to shift fundamentally the way things get done," Bromilow says. "We're not saying that companies should write comment letters. But some of these have such incredible implications that it's worth a discussion between management and the audit committee."
For more on Dodd-Frank's whistleblower provision, see More Whistleblowing in the Wind.