Mark Zastre:
Not long ago, audit committee members' primary focus was on the financial statements. Today, the audit committee is expected to understand geopolitical risk, cyber threats, AI adoption, regulatory change and investor expectations. Here's what audit committees are currently missing.
My name is Mark Zastre. I'm an audit partner and the leader of BDO Canada's National, Capital Markets and Public Company Practice. In this episode of "BDO Explained," we'll explore the three boardroom blind spots audit committees should be thinking about right now and why they may have a bigger impact on organizational resilience than many realize.
[Blind spot 1: The risk you have not planned for yet]
Think about the risks dominating boardroom conversations today. Geopolitical tensions, evolving regulations, economic volatility, cybersecurity threats, and increasing fraud risk. The risk landscape is constantly shifting, and for the audit committees, that changes the job. If a major disruption happened tomorrow, how prepared would your organization be? Audit committees need to ensure that management identifies emerging risks and prepares for multiple scenarios. But just as importantly, they need to understand how quickly those risks can evolve and whether the organization can evolve with them. This means having the right processes, controls and crisis response plans in place before an issue arises. When uncertainty increases, resilience becomes just as important as prediction.
[Blind spot number two: the story behind the numbers.]
Financial reporting has always been about numbers. Today, it's becoming increasingly about judgment. Audit committees should not only look at the accuracy of the numbers, but also consider whether stakeholders understand what is driving them. That means taking a deeper look beyond the reported results and focusing on the estimates, assumptions and judgements behind them. What happens if market conditions or company-specific factors change? How sensitive are key assumptions and estimates to uncertainty? Adding to the challenge are new reporting requirements like IFRS 18, which will significantly change how organizations present financial performance and communicate results. For many organization, the transition may extend beyond the finance function, requiring updates to systems, processes, controls and governance structures. Strong financial reporting supports more than compliance, it helps build credibility, strengthens shareholder confidence and provides context behind the numbers.
[Blind spot number three: technology and AI fluency is moving faster than governance.]
According to BDO's AI Vision 2030 research, many organizations are still moving from experimentation towards responsible enterprise-wide adoption, and that is where the challenge begins. Technology alone isn't enough. Organizations also need governance, accountability, workforce readiness, and a clear understanding of business value. For audit committees, that means asking new questions. This creates an important shift in responsibility. Where is AI being used? And who is accountable for the results? How are risks being monitored? And do governance frameworks evolve as quickly as the technology they're meant to oversee? The greatest risk may not be adopting new technology too quickly, it may be allowing governance to fall behind it. That also means the technology fluency is no longer a specialized skill for boards and audit committees, but is rather becoming a core requirement for effective oversight. The organizations that benefit most from AI won't necessarily be the ones with the most advanced technology, they'll be the ones with the strongest governance around it.
[Final thoughts]
Whether it's emerging risks, increasing reporting complexity or the rapid pace of technological change, the common challenge is uncertainty. And when uncertainty becomes the norm, effective oversight also looks different. The audit committee that creates the most value won't necessarily be the ones with all the answers. They'll be asking the right questions about risk, reporting and technology long before those questions become urgent. Explore BDO's Public Company Knowledge Hub for insights on audit committee priorities, governance, financial reporting, IFRS 18, and emerging technology risks.