Audit committee self-evaluation questions Audit committee chair considerations Discussion points and interesting observations

Some jurisdictions designate the audit committee Audit committees will need to be clear as to whether Governance practices over E&S matters have been
as responsible for reviewing certain areas of the board expects the audit committee to oversee the evolving for a number of years, without specific regulatory
mandatory reporting. accuracy of nonfinancial metrics, including metrics on requirements. Usually either the full board or a dedicated
environmental and social topics. The audit committee’s sustainability committee will be responsible for determining
The Finnish Corporate Governance Code suggests general knowledge of assurance concepts makes it well the materiality of an E&S topic, selecting metrics to
that the duties of the audit committee could include placed to support the board in this respect, but the track progress, setting targets and establishing plans to
reviewing the corporate governance statement and proliferation of the metrics included in annual reports can achieve those targets. The more importance boards place
proposing it to the board for approval. While this make this a very time-consuming task. on sustainable business strategies, the more the control
is not mandated, it is common practice for Finnish environment underpinning the production of E&S metrics
audit committees. and goals will need to become as strong as internal controls
To what extent is the level of oversight that
over financial reporting. Audit committees’ experience
the audit committee has over the accuracy of
of business risks, risk management systems, reporting
prominent nonfinancial metrics commensurate
Where there are mandatory disclosure requirements, processes and assurance makes them uniquely placed to
with the reliance placed on those metrics by
the audit committee needs to be clear whether oversee:
stakeholders?
its remit involves overseeing the completeness of
• W
► hether the processes for data collection that
associated disclosures. How has the audit committee considered the
underpin reporting are robust and lead to reliable,
adequacy of assurance over these metrics?
quality reporting (the COSO framework was updated
Having read the narrative in the annual in 2023 to address internal control over sustainability
report, which potential inconsistencies with reporting – ICSR)18
7.2.3 Environmental and social reporting
the information contained in the financial
• D
► ata provenance
statements, or with the picture of the company Environmental and social (E&S) reporting is a combination
it was presented with throughout the year, did of narrative and nonfinancial metrics. In recent years, the • T
► he reasonability of underlying assumptions
the audit committee query with management? prevalence of reporting on E&S topics has been expanding.
• W
► hat external assurance, if any, may be appropriate
This is both in response to the expectations of investors
and other stakeholders, as well as in response to regulatory The importance of these considerations cannot be
7.2.2 Nonfinancial metrics reporting requirements. underestimated. Consumers, investors and regulators are
Nonfinancial metrics are those numerical disclosures increasingly demanding ethical and sustainable business
While E&S issues are increasingly explored within the
that are not derived from a company’s financial records, practices. The commercial benefits that can be gained from
annual report, many companies have developed an entire
e.g., operational metrics. Some of these, such as client meeting this demand can also lead to companies portraying
suite of reports focused on sustainability. Some of these
satisfaction measures (net promoter score), can be services and products as “green,” even if the underlying
are dedicated to a single topic and some, often referred to
industry-agnostic. Others, like volumes of reserves and business activities do not strictly warrant these claims.
as sustainability reports, cover all E&S matters considered
resources for mining companies, can be sector-specific. to be material.
18
Achieving Effective Internal Control over Sustainability Reporting (ICSR), Committee of Sponsoring Organizations of the Treadway Commission, 2023.
Audit Committee Guide 42