A recent survey of audit committee members found that 65 percent say they lack the tools and transparency to properly access risks and exposure. A full 95 percent believe greater clarity in balance sheets is required.
The survey, conducted at the 2008 PricewaterhouseCoopers Audit Committee Forum and included responses from more than 300 financial services directors, also found that 80 percent of U.S. financial company board members believe they can domore to avoid market turmoil in the future.
The Forum, which had at its focus the current market slowdown and the steps needed for improvement, is billed as “industry’s largest gathering of financial services audit committee members,” and addressed a number of pertinent accounting topics, including off-balance sheet assets and fair-value accounting.
One key finding was that 88 percent of survey respondents felt the current state of risk management does not adequately account for off-balance sheet entities. A full 96 percent of the survey pool said that financial institutions should report more frequently and fully the information as relates to a company’s off-balance sheet holdings.
As regards fair-value accounting, 65 percent of respondents agreed that its use creates volatility in the market, but 83 percent said that such use was not to blame for the credit crisis. Fair-value—or mark-to-market—accounting is the practice of valuing a company’s asset at its current market value rather than taking into consideration its potential. Many financial industry auditors have blamed its use for at least accelerating the recent financial downturn.
In looking to the future, 41 percent of directors identified regaining investor confidence as the greatest challenge, with 36 percent seeing the need for capital as the chief obstacle. 15 percent of respondents saw responding to the government’s increased presence in the market as the greatest challenge, with a mere 3 percent exhibiting concern over potential layoffs.