Main Roles of Audit Committee
Wednesday, April 22, 2009
The board should establish an audit committee of at least three, or in the case of smaller companies two, members, who should all be independent non-executive directors. The board should satisfy itself that at least one member of the audit committee has recent and relevant financial experience.
The main role and responsibilities of the audit committee should be set out in written terms of
reference and should include:
- to monitor the integrity of the financial statements of the company, and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them;
- to review the company’s internal financial controls and, unless expressly addressed by a separate board risk committee composed of independent directors, or by the board itself, to review the company’s internal control and risk management systems;
- to monitor and review the effectiveness of the company’s internal audit function;
- to make recommendations to the board, for it to put to the shareholders for their approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor;
- to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements;
- to develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm;
- and to report to the board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken.
Labels: Auditing
posted @ 9:35 AM,
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10 ways to help audit committees
Tuesday, April 14, 2009
The expanded scope of audit committee responsibilities is daunting. More than ever, top management and boards of directors are being held accountable for identifying, managing, and monitoring company risks.
Audit committees need to oversee accurate financial reporting and disclosure, and help to sustain regulatory compliance, strengthen internal controls, and improve risk management. The increasing stakeholder expectations, along with the desire to make better use of organization monitoring and risk management, call for audit committees to marshal resources in the best ways possible. One resource at which audit committees should be looking for help is internal audit. Here are 10 ways to help audit committees get the most out of internal audit.
Strategy and Alignment
- Understand what your charter means and the role internal audit plays in helping you meet your audit committee responsibilities.
- Compare the audit committee and internal audit charters side by side, then assess gaps and improve alignment.
Team-building and Competency
- Improve the caliber of the chief audit executive (CAE), and help develop the overall quality and stature of internal audit.
- Determine if the internal audit budget is sufficient in light of higher standards for internal controls and good governance.
Support
- Understand internal audit risk assessments and offer input into the internal audit planning process.
- Insist on prioritization of audit issues, along with relevant and timely reporting.
- Ensure management accountability and followup of issues identified by internal audit.
Monitoring and Moving Toward Best Practices
- Expect internal audit to provide ongoing updates and identify new risks going forward.
- Call on internal audit’s help with enterprise risk management and strategic audits (e.g., corporate governance audit).
- Sponsor the quality assurance review (QAR) of internal audit and push for continuous improvement.
Labels: Auditing
posted @ 10:56 AM,
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