Risk assessment: Old problem, new guidance
Assessing risk is as hard as ever, but help may be on the way.
A report from PricewaterhouseCoopers finds, among other things, that two-thirds of corporate board members surveyed believe today's boards don't have the tools and transparency necessary to properly assess risk.
The survey was completed at PwC's Financial Services Audit Committee Forum, where "the leading topic of discussion ... was the current market environment and what can be done to avoid future market turbulence," the firm reports. "More than 95 percent of the board members asked said they believe greater clarity is required as it relates to what is and what is not reported on an organization's balance sheet, and 77 percent said existing valuation tools are not robust enough."
Sounds like a call to arms for enhanced business reporting. Find out more about EBR here and decide for yourself.
Meanwhile, the Public Company Accounting Oversight Board is seeking public comment on seven newly proposed auditing standards that should help auditors better assess and respond to risk. The proposed standards center on the following areas:
- Audit risk in an audit of financial statements
- Audit planning and supervision
- Identifying and assessing risks of material misstatement
- The auditor's responses to the risks of material misstatement
- Evaluating audit results
- Consideration of materiality in planning and performing an audit
- Audit evidence
"The proposed standards," states the PCAOB, "would establish requirements and provide direction on audit procedures performed throughout the audit, from the initial planning stages through the evaluation of the audit results in forming the opinions in the auditor's report."
Read more about the proposed standards here, then tell us: Will they help? Could improved risk assessment help prevent future market volatility?