The audit committee of the board reviews and approves the competency requirements of all individuals serving in key financial reporting and internal audit roles and for all members of the audit committee. These are based on applicable laws and regulations, and on the expertise needed for applying the entity's existing policies and practices related to external financial reporting.

Management develops and maintains policies and practices that reflect the organization's values and objectives. For instance, job descriptions capture the expectations in terms of the knowledge, skills, expertise, and credentials needed to effectively carry out responsibilities for each financial reporting position.

The finance department regularly reviews the entity's accounting and reporting policies and practices, and updates these as necessary to keep pace with internal expectations and external factors, including changes in technical standards and regulatory requirements.

The human resources department periodically updates materials outlining the company's policies and procedures on attracting, training, coaching, evaluating, and retaining personnel.

Asha Sandhu leads the human resources department of NetTech Industries, a provider of networking technology platforms. She works with the business unit and functional leaders to define the roles and responsibilities of personnel and related job descriptions that are aligned to the company's objectives. For instance, she helps the chief financial officer establish the job descriptions of financial reporting personnel, tying back to the performance of accounting, reporting, and internal control policies and procedures. She also brings together the respective owners of policies and procedures to review the continued relevance and adequacy of content, considering relevant factors such as organizational changes, new accounting standards, or revised disclosure requirements. She ultimately facilitates the update process, communications, and training, as necessary.

Policies and practices that represent the entity's competence standards for financial reporting positions are used as a basis for human resource and employee compliance activities, which may include:

The CFO of La Porte, a garage door manufacturer, is looking to fill the position of controller for its affiliate in France. The job requires someone with in-depth experience in local public filing reporting compliance requirements, a high level of integrity, and sound ethical values.

La Porte has screened candidates through interviews by a cross-section of leaders of key departments, the human resources department running background checks, and the CFO interviewing the candidates’ references. The assessment criteria included the extent of each candidates’ technical accounting knowledge, the complexity of issues they had dealt with in their career to date, their willingness to learn and take on new challenges, and the ability to make ethical business decisions.

When hired, the successful candidate will be expected to participate in several relevant conferences throughout the year to maintain a current level of knowledge of industry and financial reporting matters and recognize that he or she is valued as an important asset to the company.

A leading provider of consumer credit, Credit Safe, believes in establishing and reinforcing a culture in which its employees are aware of performance expectations and requirements. To that end, annual performance objectives are established and documented for each employee. For example, employees working in finance and internal audit roles are expected to either work toward obtaining a certification or attend a requisite amount of continuing education training to maintain existing certifications.

Credit Safe periodically evaluates every employee's performance and tracks it against established objectives. Management provides feedback and guidance to help employees achieve the objectives. At the end of each year, an employee's performance is rated as one of several categories: superior, exceeds expectations, meets expectations, needs improvement, or unsatisfactory.

Training needs are identified and delivered to targeted personnel. These address regulatory expectations, emerging accounting and reporting standards, and in-house input on areas that require improvement. Training needs are reprioritized as necessary in response to how often applicable changes occur, both within and outside the organization.

Orex, a mining exploration company that makes extensive use of stock options in compensating its senior employees, has been subject to a pronouncement on accounting for stock compensation. Max Tellemann, the chief financial officer, and Arlene Shreve, the company controller, attended an external training session on the pronouncement, which included working through examples of how the standard would be applied in various cases. Mr. Tellemann and Ms. Shreve assessed the suitability of their company's practices by performing an impact analysis based on expert opinions and trade publications that discuss expected impacts and pitfalls. They then revised existing policies and procedures and provided communications and training to affected personnel.

This intensive training has provided senior management of Orex with the confidence that their CFO and controller now have sufficient knowledge to make informed decisions on the proper application of the standard. Documentation of the training attended has been tracked and included in Ms. Shreve's and Mr. Tellemann's employee files.

Management identifies the required skills and experience necessary to support the entity's external financial reporting objectives. It then decides whether to internally retain people with the skills and experience or to outsource to a third party. The suitability of a third party is determined not only by assessing skills and experience, but also by considering the entity's policies on using vendors and on ethical standards. The contractual arrangement with the outsourced service provider captures these competence requirements and provides the basis for the entity to periodically assess the outsourced service provider's continued commitment to competence.

Compu Services, a developer of analytical software products, currently has limited tax accounting expertise among its staff. The finance director therefore sought to contract with a third-party accounting firm, SMR Ledger, LLP, to review its tax provisions. SMR Ledger is a different accounting firm from the Compu Services auditor.

For successful selection and use of the vendor's services, management was careful to verify that the vendor met the suitability standards set forth in Compu Services’ policies. Being directly affected by the quality of the control procedures carried out by the vendor, the CFO spends time with the vendor to understand any assumptions used in models or calculations, particularly as they may impact financial reporting. Indeed, while Compu Services’ management chooses to outsource certain tax activities, it remains responsible for the effectiveness of relevant controls regardless of where they are operated. The company therefore requests annual independent certifications of the vendor's internal control effectiveness.

To instill a common understanding and application of expected competence and behavioral standards, management consistently communicates expectations through policies and conducts practices and evaluates employee adherence by:

Using the same criteria, the board of directors evaluates the competencies of individuals serving in key financial reporting roles, such as the chief executive officer, chief financial officer, and chief audit executive.

City Government periodically reviews the performance of its employees who are responsible for owning, executing, or testing financial reporting controls. Performance is evaluated against expectations that are established at the beginning of each year. The progress achieved on needed improvements is reviewed with employees at the end of each quarter, and a more formal annual review process occurs following the year-end reporting cycle. An employee's career advancement is based on the overall performance rating. Management identifies specific areas for improvement and professional growth, which employees can address with training and development steps, as jointly agreed with the respective manager in the context of City Government's finance function and overall performance objectives.

The bylaws of Lead Products Co. specify the responsibility of the audit committee of the board for reviewing the principal roles and responsibilities of key financial reporting senior management. To this end, the chair of the audit committee meets annually with the company's human resources director, chief audit executive, and legal counsel to review the roles, responsibilities, and performance of the various company managers. The review focuses on aligning respective managerial responsibilities with Lead Products’ organization chart, and the managers’ expertise and experience in carrying out the responsibilities. The audit committee also evaluates the independence of the relationship between management and the chief audit executive, considering input from the chief financial officer and other primary customers of internal audit services.

Senior management evaluates the capacity of personnel who are involved in recording and reporting financial information, and in designing and developing financial reporting systems including underlying IT systems. Senior management assesses the department's ability to identify issues, articulate positions supported by the relevant literature, and stay abreast of technical financial reporting developments. Considerations when assessing the adequacy of staffing levels and competence of financial reporting personnel include the extent of technical skills, nature and frequency of their training, workload, and the number of personnel dedicated to financial reporting.

The senior management of Tall Tree Finance, an investment bank and institutional securities company, annually assesses the adequacy of staffing levels of its key financial reporting function to understand and manage effectively the company's current business activities, related accounting questions, and IT implementation challenges. The audit committee oversees this assessment.

In particular, the assessment considers how adequately personnel respond to emerging accounting, reporting, and internal control issues. Senior management uses the results of this assessment to make decisions on staff training, reassignments, or other organizational changes.

The start-up company of Wireless Data Communications has seen its revenue double over the last several years, and business transactions and processing have become significantly more complex. Because of these evolving corporate needs due to the rapid growth, it is essential for employee competencies in key financial reporting positions to be aligned with increased levels of complexity.

Consequently, the CEO, CFO, and vice-president of human resources together annually review employee job descriptions, workload, and performance assessments. During a recent review, they determined that the company's controller, hired initially to perform basic accounting and bookkeeping functions, no longer had the expertise needed for the associated financial reporting responsibilities. The company has now assigned the controller to a position better suited to his skills, and hired an individual with the requisite competencies as controller.

The board of directors identifies the essential roles for the functioning of the business, including the CEO and the CFO, deemed most important to the achievement of the entity's financial reporting objectives. For each of those roles, management defines succession plans to ease any future transition and to mitigate the risk of not meeting financial reporting objectives. The board of directors oversees this process to ensure that management has properly assessed and managed the risks associated with succession planning.

North-to-South Healthcare has an aging workforce and realizes it needs a succession plan. Over the past year it developed a "talent management strategy," which formalizes a succession planning framework and a process and leadership development program. The succession plan identifies those positions and external parties that are critical to the organization.

North-to-South has assessed current personnel to determine potential candidates for those critical positions in the future. The company has developed customized competency models for each of the critical positions and assessed the competencies of current staff as possible future candidates. For each of the identified candidates, an individual development plan and a leadership program have been established. These include experiential learning programs and executive mentoring programs.

For outsourced service providers or business partners critical to the performance of external financial reporting (such as information technology, payroll, accounts payable processing), North-to-South has defined contingency plans to allow for alternative arrangements in the event that such external parties become unavailable. The management member responsible for the relationship is also responsible for maintaining and executing the contingency plan, as necessary.

The talent management strategy has allowed North-to-South to confidently plan for the future.