Q&A with Dabie Tsai, Former KPMG Audit Partner
Dabie Tsai was an audit partner with KPMG until September 2018. She spent 23 years with the global Big 4 accounting firm network and worked with KPMG in the United States, Canada, Spain and Chile. Dabie was most recently the Global Lead Audit Engagement Partner on KPMG Spain’s largest audit client. Prior to that, she had various lead roles on KPMG US’s largest global audit clients in the financial services and telecommunications industries.
Dabie had significant experience leading her firm’s interactions with her clients’ audit committees, senior management and internal auditors. She is well-versed in discussing the implications of US GAAP, IFRS, SEC 33 and 34 Act filing matters, corporate governance, internal control, technology, cyber and other risks with audit committees.
Dabie had developed and delivered numerous training courses on technical accounting matters and audit methodology to KPMG’s national and international audiences. She had also participated on and led teams of reviewers for KPMG’s Quality Performance Review Program in the US and Latin America in both English and Spanish. Dabie has authored for a Spanish financial newspaper and spoken to a wide variety of audiences, including at industry forums and universities.
Dabie Tsai is a strong proponent for diversity. She was the partner champion for KPMG’s Network of Women as well as for its Asian Pacific Islanders Network. Dabie believes diversity, be they gender, culture, race or other experiences, help to complement an organization in all its tasks, including at the board and audit committee levels.
Dabie is the audit committee chair and member of board of directors of Oxfam America. She was also formerly the acting audit committee chair and member of board of directors of Kansas City Young Audiences Association.
Stephen spoke with Dabie about her perspectives on corporate governance matters, in particular as they relate to audit committees.
How does accounting and risk management intersect?
Accounting is the backbone of how organizations can measure its financial performance. As such, sound accounting is a critical part of risk management. By having a current and robust accounting framework, a company can consistently and appropriately define and measure its objectives and its achievements. This provides management and those charged with governance and oversight an essential tool in managing the company’s various risks.
In today’s world, risks come in many forms – operational, financial, regulatory, cyber, reputational, and others. It is critical for an organization to have a comprehensive risk platform and a developed risk taxonomy, so its management and those charged with its governance can clearly define its risk appetite and thereby managing to such objectives. Risk management can utilize many KPIs (key performance indicators), some quantitative while others qualitative. However, without a solid accounting basis as its backbone, risk management may be cast adrift without a suitable focus or reliability.
Talking about organizational culture, does it have an impact on the accounting standards and policies of a company?
Organizational culture is critical to how visions and objectives are realized in businesses. Depending on its organizational culture and its tone at the top, an organization may be achieving short-term success, but is unable to sustain long-term excellence. A culture that is too aggressive, or ignores the importance of appropriate ethics and compliance, may lead its management to sacrifice due responsibility for rewards. On the other hand, a culture that may not be clearly defined may obfuscate management and its employees in being able to execute on the vision, mission and objectives of the company.
Because of the importance of tone at the top, different organizational cultures impact the accounting standards and policies of a company significantly. A prudent organizational culture will likely lead to the selection and promulgation of accounting standards and policies that are sound and faithful measurements of its financial performance. An aggressive organizational culture may result in accounting standards and policies that wade into greyer areas. For instance, while US GAAP is more prescriptive, IFRS tends to be more principle-based and therefore can lead to more interpretations by different companies. Within each generally accepted accounting principle where an organization domiciles or follows, there may be choices or elections. As such, these different choices, elections or interpretations may be influenced by the organizational culture of the company.
How do audit committees play a role in organizational culture?
For those charged with governance, such as the board of directors and its audit committee, it is important to continue to review, understand and challenge the accounting standards and policies adopted by a company in order to assess whether they are appropriate for the organization’s activities and whether any bias in organizational culture may have impacted the company’s accounting framework.
For instance, through its interactions with a company’s own internal auditors or its external auditors, audit committees should understand the auditors’ views of where and how the company’s organizational culture “sit” in comparison to its peers or to best practices. Audit committees should have regular training or update sessions from corporate governance and/or risk experts to continually inform themselves on whether the company’s organizational culture remains appropriate or if it has veered in a direction not commensurate with the company’s objectives, the business environment and the committee members’ own compass.
In defining what appropriate risk and reward is, those charged with governance – and this may be broader than just the audit committee of the board – committee or board members should also assess whether management understand, respect and concur with such risk and reward structures, as those with different cultural philosophies may not be the best stewards to execute a company’s operations while adhering to its cultural values.
In addition, it is also important to have periodic reviews of how an organization’s culture and core values line up with its performance objectives and today’s environment. The world changes, and behaviors that may have been considered acceptable or overlooked in times past may now need to be called into account. Being a good corporate citizen means not only performing well financially for an organization’s stakeholders, but also means that financial performance is accompanied by integrity and due care. Providing sufficient and appropriate oversight is a key part of the responsibility of audit committees/board of directors.