Audit Committees Face Significant New Compliance Oversight Pressures

New policy initiatives from the Trump administration, and the turbulence with which they have been introduced, combine to present board audit committees with unexpected new compliance oversight pressures.

Every new administration has the right to institute its own policies with respect to legal and regulatory enforcement, and the Trump administration is no different in that regard.  Furthermore, there was a clear sense following the election that the new administration would pursue substantive policy changes in many compliance-oriented areas, including the Department of Justice’s civil and criminal enforcement priorities.

But the scope of this change, and the tempo in which it has been introduced, have been extraordinary.  This in turn has created a variety of new challenges for the audit committee, including but not limited to the following:

1. The Sheer Pace of Change.  The new administration’s “flood the zone” approach to policy implementation has had an impact well beyond Congressional offices, statehouses and, to a certain respect, the courts.  Many corporate leadership teams feel overwhelmed by the sheer volume of the new initiatives, leaving them at least temporarily uncertain as to their scope, their correct legal interpretation, and their enforcement implications for corporate strategy.

This uncertainty has had a particular impact on the audit committee agenda, which in many companies has oversight responsibility for risk management and compliance, among other traditional duties.  The administration’s full-throttle approach has also disrupted the scope of the committee’s oversight, including the criteria for assessing organizational risk, and has served to increase the time commitment required of committee members.

2. Corporate Fraud Enforcement.  Recently released memoranda from the Trump administration’s Department of Justice (“DOJ”), led by Attorney General Pam Bondi, emphasizes a renewed federal enforcement focus on traditional “law and order” issues such as violent crime, border security, transnational organized crime, drug cartels, and human trafficking.

The growing public perception is that white collar enforcement initiatives will take a backseat in focus as DOJ shifts resources and adopts what has been described as a more “business friendly” position with regard to civil and criminal enforcement measures.  It’s a perception supported by the President’s notable February 10, 2025 executive order directing DOJ to pause Foreign Corrupt Practices Act (FCPA) investigations and enforcement actions for a 180-day review period.

And it’s conceivable that the Trump DOJ may pause other corporate fraud policies, make temporary adjustments to them, or simply rescind them, returning to previous controls while conducting a broader reassessment of policies in both the Justice Manual and through controlling Attorney General and Deputy Attorney General memoranda. 

Making such changes would also be within the administration’s authority, and policy overhauls have historically occurred with previous administrations.  Audit committees are well advised to closely monitor DOJ’s publications and speeches from top leadership as the new corporate enforcement approach materializes.

However, unless and until DOJ formalizes and implements any changes, it’s important for audit committees to recognize that existing corporate enforcement policies remain in effect.  Most importantly, the underlying fraud statutes have not been revised and cannot be revised short of congressional action.  And, of course, a new administration will take office in 2029.

Such recognition by the committee will help assure appropriate compliance standards and prevent employees from pursuing aggressive initiatives that may “plant the seeds” of conduct.

3. Fluid Risk Evaluation Standards.  The audit committee’s efforts to apply a reasonable risk profile for the organization could be affected by pressure from the executive leadership team (“ELT”) and others to apply less rigorous evaluation standards.  This, should the ELT perceive a shift in DOJ enforcement focus away from corporate fraud that in their view merited relaxed audit committee oversight.  Such ELT perceptions could be enhanced by seemingly unrelated actions such as the government’s termination of compliance officials such as inspectors general and judge advocate generals.

In such circumstances, the audit committee may be asked to evaluate proposed corporate projects from the more lenient standard of likelihood of enforcement (i.e., even if the project could be reasonably be interpreted as violating applicable law, whether the company is unlikely to face enforcement for initiating it).  This, as opposed to a more rigorous standard of likelihood of violating the law (i.e., whether the project could reasonably be interpreted as violating the law and would be likely to face enforcement for initiating it).  Such a shift in risk oversight standards –while not illegal – could have a significant impact on the company’s culture of compliance and, potentially, on how some third parties might interpret the vitality of committee oversight.

The audit committee’s challenges will be at least temporarily increased by DOJ’s decision not to have its senior officials appear, as has historically been the case, at the ABA’s annual White Collar Conference. Such appearances have in the past provided an opportunity for these officials to provide updates on department enforcement priorities.

4. New Areas for Compliance Oversight.  Perhaps the most unique new challenge facing audit committees is the need to expand the scope of the company’s corporate compliance programming.  This, in order to accommodate new legal obligations arising from Trump administration initiatives that may require board/committee oversight.  Many of these arise from the scores of Executive Orders issued by President Trump.

Indeed, President Trump has signed more executive orders in his first month in office than any recent president has in their first 100 days, creating a flurry of new policies.  The changes affect both the public and private sector, and more executive actions are likely on the horizon.  Examples of just some of the orders include:

• Prohibitions on the use of federal funds for gender-affirming medical care for minors;
• Three orders targeting affirmative action/DEI programs;
• Increased immigration enforcement;
• Changes to government contracts and funding requirements; and
• Implementation and enforcement of price and quality transparency regulations for health care organizations.

5. Education and Culture.  Given these new and unique pressures, the audit committee may choose to focus its compliance oversight attention in several ways:

First is to work with the full board and executive leadership to assure appropriate levels of corporate compliance funding and personnel resources.  Note in that respect that there is no indication that the Delaware courts will soon relax their own Caremark standards of officer and director compliance oversight responsibility.  This, despite proposed new changes to Delaware corporate law.

Second is the need to train executives, line management and other employees on the compliance challenges arising from the new administration’s policies and procedures.  This education would include specific enforcement risks arising from the Executive Orders applicable to the company’s business.

Third is that boards may need to confront internal enforcement misperceptions by management team members who may be prone to “push the edge of the envelope”; i.e., managers who might view Trump administration policy changes and DOJ’s shifting priorities as a “green light” to accept much greater risk in their business strategies.

Foundationally, the audit committee should continue to support the General Counsel and the Chief Compliance Officer in their efforts to preserve the integrity of the company’s legal control and compliance education systems within the context of rapid changes to federal law and enforcement priorities and their application to new compliance threats.