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Topics for Your Upcoming Board and Audit Committee Meetings

Executive Resource
Weaver offers information and insights to help you ask the right questions and determine appropriate plans of action based on topics and trends as they unfold.
June 28, 2024

With the U.S. presidential election looming, the condition of the economy is top of mind at quarterly board meetings. Inflation may have plateaued, and the Fed has signaled a pause in its efforts to control inflation by raising interest rates. At quarterly board meetings, other issues related to an organization’s internal functions may be considered.

Weaver, knowledgeable in advisory services, offers several topics to incorporate into your next board meeting to generate productive discussion and illuminate prospective opportunities as well as challenges. The following five questions can serve as a guide for your next board meeting, helping to secure your organization’s future from possible risks the future may hold.

1. Has the organization considered the potential effects of the elimination of certain provisions of the Tax Cuts and Jobs Act of 2017?

The Tax Cut and Jobs Act of 2017 made sweeping changes to corporate taxes, but many of these were temporary and scheduled to be phased out over five or more years.

One provision that is scheduled to disappear could affect shareholder value. The TCJA decoupled the tax brackets that apply to capital gains and qualified dividends from the brackets that apply to ordinary income. Although tax rates are unchanged, the separate tax brackets allow high-income taxpayers to determine their capital gains tax bracket with their capital gains and qualified dividends only rather than combining it with their ordinary income. Beginning in 2026, however, taxpayers must again determine their capital gains tax rates using their total income.

The TCJA also allowed businesses to deduct 100 percent of the cost of eligible property immediately. Beginning in 2023, the deduction began a five-year phase-out. The bonus depreciation rate is 60 percent for assets placed in service in 2024 and will drop to 40 percent for assets placed in service in 2025. Companies can realize a significant tax savings by taking the higher bonus depreciation deduction for 2024. Even if an asset is not “placed in service” for GAAP purposes, it can still be eligible to be placed in service for tax purposes if it is “in a condition or state of readiness and availability for a specifically assigned function.”

2. Is the organization preparing its internal audit function to conform with the new professional standards?

This year, the Institute of Internal Auditors (IIA) released updated standards that are scheduled to take effect in January 2025. These updates reflect an overall change in the role of the internal audit (IA) function in organizations of all sizes.  Depending on the maturity level of the IA function within the organization, conforming to the new standard may require changes to structure and governance.

3. Does the organization have an adequate succession plan for key positions?

One of the greatest risks to organizational stability is the loss of key personnel. A solid succession plan identifies individuals at all levels of the organization who can take over when the person above them departs. Mitigating the impact of a personnel loss requires multiple components to function effectively: recruiting the right people, identifying high performers, providing new challenges and quality professional development, mentoring those with high potential, and compensating them fairly.  Succession planning reaches beyond leadership levels, crossing all critical operational functions. Ask these questions:

4. Is the organization at risk due to its dependence on a “single point of reliance?”

If one individual can cause an entire process to fail, the entire organization may be at risk.  Organizational governance should mitigate against a single person with the access, knowledge, or authority to perform a critical action. Examples of a “single point of reliance” include having only one individual with access to an application critical to a process, knowing where key data is stored, or understanding critical equipment requirements. Ask these questions to assess where your organization faces risks related to a single point of reliance.

5. Has the organization adequately addressed AI-related risks, considering recent upgrades?

Regulators and industry leaders continue to provide guidance in the ever-changing landscape of generative AI, with recent upgrades now providing the ability to process voice, images, and text.  The National Institute of Standards and Technology (NIST) released the AI Risk Management Framework (RMF), as a voluntary framework to better manage risks.  On April 29, 2024, NIST released a draft publication to assist in the identification of unique risks posed by generative AI and propose actions for risk management.

Weaver offers information and insights to help you ask the right questions and determine appropriate plans of action based on topics and trends as they unfold. Subscribe to our monthly insights for articles and information to help you review your organization’s operations and prepare for change in an uncertain world. Contact us for information about these areas of Board governance.