Corporate directors believe regulatory and compliance overload is the greatest risk facing their business, well ahead of cyber threats and corruption, a new survey shows.
Also, board members seem sceptical about some new proposals from the US Public Company Accounting Oversight Board (PCAOB) regarding the auditor’s reporting model.
That’s according to the latest BDO Board Survey, which has been conducted since 2011.
In August, the PCAOB proposed widespread changes to the auditor’s reporting model, changes designed to increase the amount of information auditors disclose about their audits of US public companies.
Just 27% of public-company board members in the BDO survey believe the PCAOB proposals will improve the usefulness of annual auditor’s reports. About half (45%) say the changes will not improve the auditor’s report, and 28% aren’t sure.
Most board members (78%) are in favour of the PCAOB proposal for auditor’s reports to disclose the length of the external auditor’s tenure, while 67% oppose the proposal that the auditor’s report evaluate information beyond financial statements for potential errors or misstatements that conflict with information obtained during the audit.
Thoughts on risk, succession planning
Regulatory and compliance overload ranked as the top risk by 69% of respondents, and cyber threats were second at 13%. Embezzlement or similar crimes against a company was listed as the greatest fraud risk (42%), followed by corruption or bribery (20%).
More than half of respondents (56%) said their company conducts business in other countries or has overseas customers or suppliers. More than one-third (38%) of respondents whose companies conduct business internationally believe that compliance risks related to bribery of foreign officials have increased over the past two years, compared with 10% reporting a decrease.
Succession planning was the topic that 47% of respondents said they would like to spend more time on. That’s similar to the previous year’s survey, when succession planning also ranked first at 49%.
Risk management has slid down the list in the past three surveys, ranking as the most common topic board members would spend more time on in 2011 (55%). It declined to 47% in 2012 and 38% in the most recent survey, behind succession planning and industry competitors (45%).
The topic board members most want to spend less time on is compliance and regulatory issues (20%).
Related CGMA Magazine content:
“Corporate Directors Say New Regulations Aren’t Worth the Costs”: Nearly two-thirds of US public company directors said recent regulatory and enforcement initiatives have not increased investor protections, according to a PwC survey last summer.
“Three Steps to Safeguard Against Corruption”: Regulators worldwide have stepped up enforcement of anti-corruption laws, especially as more and more companies of all sizes have invested in doing business abroad. Find out how to reduce your risk of corruption and bribery by employees or third parties.
—Neil Amato (firstname.lastname@example.org) is a CGMA Magazine senior editor.