Financial executives believe that heightened focus on risk will increase demands on audit committees and, by extension, company CFOs over the next two years, according to a survey by the Canadian Financial Executives Research Foundation.

The study, The CFO and the audit committee, says that 92% of survey respondents feel greater concerns regarding risk management are shaping the expectations of audit committees and CFOs. Recent turmoil in the capital and debt markets were cited as a secondary factor, with 82% of respondents saying the volatility has led to increased pressure.

While corporate directors once maintained a fairly standoffish approach to organizational operations, developments over the past decade have changed that, first with the introduction of the U.S.’s Sarbanes-Oxley Act and Canada’s counterpart, National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings, and then with public and industry reaction to 2008’s financial crisis.

As a result, boards, audit committees and senior management are all seeing their roles evolve as they become more intertwined.

When asked about responsibility for risk management, survey respondents were divided: 42% said risk is primarily a board responsibility, while 36% said it was a responsibility shared equally by the board and the audit committee and 22% said it falls solely to the audit committee.

“Although risk is clearly a board responsibility, its complexity may result in its diversion to the audit committee,” says the report. “The complexity drives the board to rely on the audit committee to do the research, ask hard questions, make recommendations and report back to the board.”

“The study shows that CFOs need to help board directors—and audit committee members in particular—to better understand the business challenges that their organizations are facing, while demonstrating the fortitude to withstand the oversight of their performance by the audit committee,” said Michael Conway, chief executive and national president of Financial Executives International, Canada (FEI).

With increasing focus on transparency in corporate governance, a strong relationship between audit committees and CFOs is essential. The good news is that most survey respondents said they’re already there. More than 90% of respondents said the CFO of their organization has an excellent relationship with the company’s audit committee

“The nature of the CFO-audit committee relationship is clearly of strong interest to financial executives,” said Todd Buchanan, national leader, accounting advisory services, KPMG LLP, which sponsored the study. “The study shows that successful audit committee relationships feature trust, respect, professionalism, collaboration, openness and transparency.”

Copyright © 2019 Transcontinental Media G.P. Originally published on

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