The audit chair: curiosity is a key skill

Audit chairs need to manage internal pressures and influence decisions. It’s very easy to see it as a technocratic position steering the committee through its agenda, but a large part of their job is understanding the nuances of bringing together people with different perspectives and technical backgrounds.  

Carole Cran has served as audit chair for Halma plc, a global technology group, since 2016 and is also CFO of Forth Ports. In this interview I asked her to share some guidance on what the role of an audit chair looks and feels like: how does she manage priorities and what skills are required to get the most out of committee members.

Why did you decide to become a non-exec director? 

“I wanted to learn about other companies and use my own experiences to help them. And, of course, take what I gain from doing that back to my own organisation. It’s brilliant free learning!” 

What are an audit chair’s key priorities? 

"The most fundamental priority is ensuring the terms of reference are right and that they’re covered.  

Depending on the company environment, you may need to shift priorities to reflect what’s going on in the business too. For example, when Andrew Williams stepped down as CEO of Halma after 22 years, Marc Ronchetti became CEO and a new chief financial officer joined the company. Some of the sector CFOs also changed, so I shifted my priorities to reflect that. But in the context of my terms of reference.  

You also need to ensure you’re getting contributions from all committee members. It’s important in the chairing of the committee that this is always a priority. That can be easier said than done and it depends on what your key accounting judgements are. If they’re quite technical then non-accountants in the room can find it difficult to contribute. But it’s so important to respect the value that non-technical expertise brings."

What skills do audit committees need to apply the necessary scrutiny to their work?  

"You need to be curious. You need to be a good reader of body language and tone and understand how to ask an inquisitive question in a constructive way. Managing the relationships with the external auditors is also important, as are the private sessions without executives present, where committee members have the chance to engage independently with the auditors."

How can audit chairs get the most from their committee members? 

“There are different styles of chairing, but I do think there’s an onus on the audit chair to help other committee members make relevant contributions. So, for example, you could say to whoever’s presenting ‘it might be worth reminding everyone why this is so significant.’ There are ways you can ‘allow’ people to ask what they might consider a basic question, which are often the most important ones!"

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And finally, what one thing would make your work as an audit chair more enjoyable? 

“I do enjoy it. I’ve been very fortunate with Halma, there’s no doubt about that.  

Sometimes, working through the year-end reporting, you do wonder if you’re really adding value, so I suppose I’d enjoy it even more if we did give more attention to how the control and risk environment relates to the strategy. One thing I do really appreciate though is having sector CFOs, the treasurer, the CTO, and CIO joining us on rotation to present. I think that’s really important for setting the scene."

Do you have any other advice for people considering becoming an audit chair?  

“Choose wisely. Ask lots of questions about the company’s culture and purpose. You also need to have an inherent interest in the business, otherwise you’ll find it really difficult to get into the controls.

I think of an audit chair’s purview as a patchwork quilt of blocks of issues. You’re assimilating all of that and looking for any gaps to see if you can add something to the agenda, or probe whether there is really a gap. Looking out for these cues for where you should be concerned is central to the role, but how you articulate that in an annual report is quite nuanced."

The constant theme in our conversation was how much Carole appreciates the perspective that being an audit chair gives her. As she said, while it’s a responsible role that presumes existing experience and expertise, it’s also a brilliant opportunity to continue learning about corporate governance.

For more insight and guidance get in touch with Karen Brice, Gabriella Demetriou  or Sarah Bell.