October 22, 2024 • By UC Irvine Paul Merage School of Business
On October 4, corporate leaders, regulators and governance professionals from across Southern California and beyond came together at the UC Irvine Paul Merage School of Business for the 2024 Audit Committee Summit. Participants at the annual event explored the expanding responsibilities of audit committees in today's complex regulatory environment. With a focus on emerging challenges like AI governance, sustainability reporting, and heightened compliance demands, the Summit offered key insights to help audit committees navigate the evolving corporate landscape.
In his opening remarks, Merage School Dean Ian Williamson celebrated the Summit’s important role in advancing the school’s mission to foster collaboration between academia and industry. “Ideally that partnership, that interaction generates wonderful insights, which I'm certain is what's going to happen here,” Dr. Williamson said. The goal of the Audit Committee Summit is to not only inform participants about key issues but also to equip them with the knowledge needed to enhance governance and audit committee effectiveness in an increasingly complex environment.
Audit Committees Confront Dynamic Challenges
Keynote remarks were delivered in conversation between Tony Thompson, director of the Public Company Accounting Oversight Board (PCAOB), and Gina Sanchez, member of the board of the PCAOB Investor Advisory Group and founder and CEO of Chantico Global, an investment consulting firm. Merage School Associate Professor Patricia Wellmeyer moderated the conversation.
The discussion focused on the evolving responsibilities of audit committees, emphasizing regulatory challenges, AI governance, and climate change reporting.
Thompson and Sanchez highlighted the critical role of audit committees in maintaining investor trust, particularly in navigating the complexities of modern business practices and technologies. Both stressed the importance of transparency and clear metrics in evaluating audit quality, with Thompson addressing new PCAOB standards to improve audit oversight and communication.
Navigating Expanding Demands
The keynote conversation was followed by a panel discussion exploring the ways audit committees navigate the escalating expectations brought by rising regulatory demands and investor demand for rigorous governance standards. Moderated by Merage School Adjunct Professor Stephen Cooke, the conversation included Kimberly Alexy, board director at Western Digital, Redis, Netskope, and Kate Farms; Hoshi Printer, board director at Lantronix; Dane Mott, accounting analyst at Capital Group; and Ray Garcia, a partner at PwC.
The panelists stressed that audit committees now manage a broad range of risks, from financial reporting to AI and cybersecurity. They discussed strategies to manage these pressures, such as clearly defining the committee’s scope and delegating responsibilities like ESG to governance committees. Alexy and Printer emphasized pushing back on non-essential tasks to avoid "mission creep."
Garcia and Mott highlighted the need for audit committees to develop specialized skills, especially in cybersecurity, while balancing traditional financial oversight. They also stressed the importance of regular self-assessment and ensuring companies have detailed cyberattack response plans, with ongoing engagement with CIOs.
Exploring the Risks and Opportunities of AI
The afternoon session offered participants two breakout sessions. The first breakout explored the rapidly changing world of AI governance. Moderated by Peter Moore, president at Wild Oak Enterprises, a strategic consulting firm, the panelists included Ashwin “Ash” Rangan, managing director of The Insightful Group, and Cale Whittington, assurance partner at EY.
Moore highlighted the challenge that many companies face in seeing returns on AI investments due to a lack of readiness and clear strategy. Whittington stressed that few companies have formal AI oversight frameworks and urged audit committees to focus on governance, particularly in areas like data security and compliance. Generative AI’s potential to produce inaccurate outputs adds further risk, especially in financial reporting.
The panel also discussed the need for proper data organization and employee training, noting that internal resistance to AI adoption remains a key obstacle. Rangan pointed out that AI regulation is fragmented, with Europe leading while the U.S. lags behind.
Climate Change and Sustainability Disclosures
The second breakout explored another hot topic for audit committees: sustainability and climate change disclosures. The panelists included Diane Biagianti, an independent director at indie Semiconductors, and Anita Chan, a partner at KPMG. Shelly Heyduk, a partner at the law firm O’Melveny & Myers LLP, moderated the discussion.
The panel emphasized the growing need for audit committees to oversee climate-related and broader ESG risks, in light of new climate reporting regulations such as the SEC’s 2024 rules and California’s SB 253 and SB 261. Despite ongoing litigation, many companies are preparing for compliance. Audit committees may need to collaborate with other committees, like governance or risk, to ensure holistic oversight.
The discussion also covered the importance of integrating long-term climate risks into enterprise risk management (ERM) programs. Anita Chan detailed the increasing demand for third-party assurance on sustainability disclosures, with CPA firms catching up to non-CPA firms in providing assurance. The panel noted that while large companies are generally prepared, smaller businesses may struggle to meet regulatory deadlines.
A Standout Day
The Merage School would like to thank the panelists and sponsors of this year’s Audit Committee Summit. This year’s sponsors included the Forum for Corporate Directors, the Corporate Directors Roundtable of Orange County, BakerTilly, Deloitte, EY, KPMG, PWC, O’Melveny & Myers, and Protiviti.
Associate Director of Communications
jrotheku@uci.edu