Scope of Risk Management:
The scope of risk management varies according to the size and the level of the risk related to the business. During the risk management, the audit committee does the planning of risk assessment and identifies the risks. Moreover, after the quantitative and the qualitative analysis, the audit committee presents the suggestions to reduce or control the risks.
The company’s strategy:
The risk management is one of the main responsibilities of the audit committee because in most of the scenarios the management of the business is busy in the vital operations of the business. The first positive impact of the risk assessment by the audit committee is that it can identify those risks which were neglected by the directors at the strategic level. The members of the audit committee are industry experts and they can access the risk of the market. For example, the management planed at the strategic level to invest in the real estate business without accounting the policies of the government. Therefore, the audit committee must identify any risk due to the policies of the government.
The Company’s Business:
The business activities are also analyzed by the audit committee during the planning and operational stages. For example, the prices of the raw material will increase due to the shortage of supply in the next few months. It is the responsibility of the audit committee to identify the potential risk and inform to the directors.
The company’s governance:
The audit committee is directly under the control of non-executive directors who are appointed by the shareholders of the business to protect their share of wealth. Therefore, the audit committee keeps a check on every transaction, strategic and operational plans of the business and inspects the board meetings to confirm that the company is governed accordingly.
Implications of the competitor’s performance:
The implication or the conclusion of the competitor’s performance is very important in the making of strategic and operational strategies of the business. The competitor’s performance can highlight the weaknesses and the strengths of the business. For example, the sales pattern on the monthly basis can identify the profit making months of the year.
The company’s strategy:
The competitor’s performance is a key signal for the management and the audit committee of the business to improve the planning and the performance of the business. At the strategic level, the performance of the competitor can be used to estimate the production level of the business. Another example is to perform analytical procedures and identify the potential market sector to maximize the profits.
The Company’s Business:
In relation to the company’s business, the competitor’s financial information can be used to compare the performance. However, it is very important for the management and the audit committee to understand the accounting standards used by the competitor. For example, the disclosure in IFRS standards is more transparent than the GAAP standards. Therefore, if the competitor is using GAAP standards, then it is important that the audit committee recommends the financial information after the audit report of the competitor.
The company’s governance:
The analysis of competitor can be used to identify the corporate governance standards of the competitor. The standards of governance in the organization are the key element in the transparency of the accounts. For example, if the governance of the competitor’s business is not according to the business ethics and regulations, then the audit committee must reject the financial information for any planning or comparing.
