KPMG/NACD Quarterly Audit Committee Webcast

Transcription

1 KPMG/NACD Quarterly September 27, 2012 Thomas J. Duffy National Managing Partner Audit KPMG LLP

2 Today s Discussion Issue Focus: Audit Committee Oversight of Tax Financial Reporting Developments Washington Update ACI Update 2

3 On the Webcast Today Host Thomas J. Duffy National Managing Partner Audit, KPMG LLP Presenters Eugene F. DeMark Director, Flowers.com, BankUnited Vernon Tracy Turner Vice President, Corporate Tax Smithfield Foods Teresa E. Iannaconi Partner, National Office KPMG LLP, and former Deputy Chief Accountant, SEC's Division of Corporation Finance Timothy G. White Partner, KPMG s Audit Committee Institute Peter R. Gleason Managing Director and Chief Financial Officer, National Association of Corporate Directors 3

4 Administrative CPE regulations require online participants to take part in online questions Must respond to four (4) questions to qualify for 1 CPE credit Questions will appear on your media player Results reviewed in the aggregate; no responses will be tracked back to any individual or organization Do not view the presentation on slide show mode polling questions will not appear Help Desk: (or outside the U.S. at ) 4

5 Audit Committee Oversight of Tax Eugene F. DeMark Director, Flowers.com, BankUnited Vernon Tracy Turner Vice President, Corporate Tax Smithfield Foods

6 The Global Tax Environment Increased complexity Stepped-up enforcement by national, state, and local tax authorities Greater cooperation among tax authorities More transparency and disclosure requirements Prospects for tax reform Growing recognition of the potential scope and nature of tax risk a risk to reputation 6

7 Audit Committee Oversight of Tax: Striking the Right Balance Help strike the right balance between tax risk and reward Understand and help determine the level and nature of tax risk that is appropriate for the company Alignment of tax risk with overall corporate risk profile What are our procedures to ensure on an ongoing basis that tax risks are properly aligned with the company s overall risk appetite? 7

8 Other Key Areas of Focus Significant judgments used in accounting and disclosures regarding income taxes Internal processes/controls for making judgments, establishing reserves Adequacy of internal controls and processes to ensure compliance with tax reporting obligations globally Both historical and new worldwide requirements Adequacy of tax resources and expertise globally Role of outside tax advisers Tax risks not managed by tax department, e.g., sales, use, payroll, property, franchise taxes, etc. Integration/coordination of tax risk management with company s broader risk management architecture 8

9 Audit Committee Interactions with Tax Directors Audit committee expectations regarding updates on company s key tax strategies and risks Nature of communications Frequency Depth of reviews Participants (e.g., tax director, CFO, CRO, CAE) 9

10 Oversight of Tax Key Takeaways Do we understand our tax risk exposure? Are we satisfied that we pass the Wall Street Journal test? How does our effective tax rate compare to peers? What are the most significant judgments and estimates used in accounting for income taxes and what is the process management uses to ensure they are reasonable? What are the key controls in the tax function globally? To what extent is the adequacy of these controls dependent on the caliber of people exercising them? Do we have the right tax resources and expertise globally? What is the role of outside tax advisers? How does tax risk fit into the company s broader ERM or risk management architecture? How do we manage the broader array of tax risks beyond income taxes e.g., sales, use, payroll, property, franchise taxes, etc.? 10

11 Financial Reporting Update Teresa E. Iannaconi Partner, National Office KPMG LLP, and former Deputy Chief Accountant, SEC's Division of Corporation Finance

12 FASB & SEC Developments FASB Lease Accounting FASB Disclosure Framework Discussion Paper Revised impairment model for financial assets SEC Conflict Minerals Disclosures IFRS SEC Staff Paper ( Kicking the can down the road ) SEC Whistleblower Program 12

13 PCAOB Update Release Concerning PCAOB Inspection Process PCAOB offered suggested approaches audit committees might consider in discussing inspections with their auditor s, including inquiries about: Whether audit overseen by the audit committee was selected by the PCAOB for inspection Potentially relevant inspection findings on other audits performed by audit firm Audit firm s response to PCAOB findings Audit firm s remedial efforts to address quality control deficiencies identified by the PCAOB Auditing Standard No. 16 Communications with Audit Committees 13

14 Washington Update Peter R. Gleason Managing Director and CFO, NACD

15 Washington Update The SEC Looking Back, Looking Ahead Two substantial governance rules in 2012 Conflict minerals Listing standards for compensation committees and advisors Some rules have been delayed indefinitely Pay-for-performance Pay ratios Hedging Clawbacks 15

16 Washington Update Preparing for 2013 Pay for performance 53 of R3000 say-on-pay advisory votes failed in 2012, 37 in 2011 Depending on SEC rule-making schedule, more data may be required for 2014 proxy season Push for independent board leadership 48 shareholder proposals for independent chairs, up from 23 in received majority support. Scrutiny on political activity 116 proposals for disclosure of political or lobbying spending Shareholder communication 16

17 KPMG s ACI Update Timothy G. White Partner, KPMG s Audit Committee Institute

18 KPMG s ACI Update ACI s 2012 Global Survey KPMG s Fall Roundtable Series (Nov. / Dec.) The New Business Integrity Challenge: Protecting Corporate Assets and the Brand in a Digitized, Global Environment 2013 Audit Committee Issues Conference: February 5-6 Miami, Florida Daylong Dialogue: Panels, Keynotes Pre-Conference Audit Committee Peer Exchanges (new) Featured: The New Political Landscape A Dialogue with Robert Reich and Alan Simpson Next KPMG/NACD Quarterly Webcast: January 10, 2013 Resources and Information KPMG s Audit Committee Institute: auditcommitteeinstitute.com National Association of Corporate Directors: nacdonline.org 18

19 Thank you for joining us. independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of The National Association of Corporate Directors is separate and distinct from KPMG International Cooperative ("KPMG International"), and its member firms. KPMG LLP (U.S.) does not provide legal services. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.