An audit committee related video discussion from Boardmember.com, This Week in the Boardroom: 04-04-13, The Audit Committee’s Role and Structure with TK Kerstetter, President, Corporate Board Member, and Trent Gazzaway, National Partner, Audit Services, Grant Thornton LLP.  Click Here To View The Video.

My thoughts.  This is a worthwhile video for its discussion (16+ minutes), particularly Mr. Gazzaway’s comments directly relating to the audit committee and the process of the audit committee reporting back to the board.  Mr. Gazzaway went into greater detail than I anticipated, and he didn’t give the board a free pass to simply delegate to the audit committee.  Mr. Gazzaway did remind us that the board remains responsible for oversight, and for oversight of the audit committee – it isn’t appropriate to simply rubberstamp the audit committee’s recommendations.  Agreed.  As we know, the board has a duty to exercise diligence, inquiry, and decision making, including over the committees of the board.

Mr. Kerstetter also asked Mr. Gazzaway asked about ERM.  I prefer “risk and uncertainty management” more in line with the discussion contained in ISO 31000.  To be fair, the video discussion did not intend or purport to cover the risk management topic area, which would be impossible given the time allocated.  And, risk and uncertainty management should be a separate discussion.

Mr. Gazzaway is correct when he says that this topic area is still in its early stages.  In fact, his comments, at least from my viewpoint, confirm that there is a current need for discussion about how to handle risk and uncertainty management.

The board is responsible for the oversight of the entity’s risk and uncertainty management.  And, if the aboard appoints a committee, I believe that it is best for the board to appoint a separate risk committee instead of delegating risk to the audit committee although delegation to the audit committee also is acceptable – the audit committee already is sufficiently busy, the potential areas of risk exceed the traditional areas addressed by the audit committee, and there is no automatic guarantee that the audit committee members are the best board members for the risk oversight topic area.  However, as we know, even if the board delegates to a risk committee, the board remains responsible for active risk and uncertainty oversight.  Whereas the entity’s actions, processes, attitude and governance relating to day-to-day risk and uncertainty management is entirely different and more detailed, of course – but those are discussions for different materials.

I also appreciated Mr. Gazzaway’s comment or warning about Regulation FD and communications with shareholder or stakeholders.  This also should be a separate topic of discussion.

View the video.  Enjoy.  Dave Tate, Esq. (San Francisco)