Financial Reporting Concerns for Audit Committees in Mid-2025: What CFOs & CAOs Must Prioritize
In mid-2025, audit committees of public companies are intensifying their oversight of financial reporting integrity, navigating a complex landscape of global volatility, technological advancements, and regulatory expectations. While their core mission remains the oversight of financial statements and Internal Controls over Financial Reporting (ICFR), which audit committees consistently rank as their “top priority,” new challenges demand heightened focus. For CFOs and Chief Accounting Officers (CAOs), these audit committee priorities translate into critical areas that must stay high on your radar to ensure SEC compliance, audit readiness, and robust financial reporting. Below are the top five audit committee priorities for mid-2025, with their direct financial reporting impacts and actionable steps for finance leaders.
Accounting for Market & Geopolitical Uncertainty - An increasingly volatile global environment, marked by geopolitical tensions, tariffs, and supply chain disruptions, impacts business operations and financial performance.
Financial Reporting Impact: This directly pressures accounting estimates and disclosures. Key areas include inventory valuation (obsolescence, impairment, write-downs, and reevaluating accounting methods due to supply chain delays and tariff-induced cost shifts), revenue recognition (changes in pricing, goods availability, and customer behavior influencing projections and practices), foreign currency translation (heightened scrutiny due to dollar volatility), and impairment testing (interim reviews, especially for goodwill and long-lived assets, as geopolitical risk changes economic outlooks). Companies also need to enhance disclosure requirements in risk factors and MD&A.
Artificial Intelligence (AI) in Financial Reporting & Controls - Artificial intelligence is rapidly integrating into business, empowering companies to transform strategy, products, services, and operations.
Financial Reporting Impact: ICFR require updates to accommodate AI-driven reviews and approvals replacing human processes, impacting financial statement reliability. AI models used in journal entries, reconciliations, or fraud detection introduce risks of data bias or inaccuracy. AI’s role in compliance (e.g., anomaly detection) and cybersecurity affects disclosure integrity.
Earnings Guidance in an Uncertain Environment - Companies are reassessing their approach to earnings guidance due to market volatility, with some opting to reduce or withdraw guidance or incorporate broader ranges and contingencies. This decision is strategic, aiming to manage shareholder expectations while maintaining transparency and credibility, but it signals a shift in management’s ability to forecast and manage risk.
Financial Reporting Impact: Oversight of earnings guidance is integral to supporting financial reporting integrity. Regulators expect such statements to be made in good faith, grounded in reasonable assumptions, and supported by internal data. Companies should confirm that disclosure controls are operating effectively and that decisions regarding guidance are well-documented and supported.
Finance Transformation & Digital Disruption - Finance transformation, leveraging digital tools, automation, data analytics, and other emerging technologies, is becoming critical for improving financial reporting, streamlining operations, and enhancing decision-making. Audit committees are often tasked with overseeing these significant transformation efforts. Audit committees are growing more concerned about the impact of digital disruption on the finance organization, including the ability to attract and retain talent, provide strategic thinking, and manage digital transformation.
Financial Reporting Impact: These transformations directly impact a company's financial health, risk management, and compliance. Companies must ensure alignment with strategic objectives, adherence to regulatory requirements, and safeguarding against potential risks such as data breaches and financial inaccuracies. The rigor of the control environment is a significant concern amid business disruption and economic slowdown.
Internal Control Environment (ICFR) Rigor - While other risks like cybersecurity and enterprise risk management are top priorities for audit committees beyond financial reporting, the fundamental oversight of financial statements and Internal Control over Financial Reporting (ICFR) remains the top priority for audit committees.
Financial Reporting Impact: In mid-2025, the rigor of the control environment is a top concern for audit committees, particularly in light of ongoing business disruptions and economic conditions. The integration of AI into financial processes necessitates that ICFR are updated for AI usage, especially when AI agents perform reviews and approvals previously done by individuals. Furthermore, effective disclosure controls are crucial for maintaining the integrity of financial reporting.
Conclusion
Audit committees in mid-2025 are navigating a dynamic environment with continued prioritization of financial reporting integrity through oversight of geopolitical risks, AI integration, earnings guidance, digital transformation, and ICFR rigor. CFOs and CAOs must align with these priorities to ensure SEC compliance and audit readiness. Reach out and I can share more about my experiences of how I’ve helped other companies navigate similar financial reporting concerns and perhaps how I can assist your company.