Newsletter | Volume 1

Issue I
Issue II
Issue III
Issue IV
Issue V
Issue VI
Issue VII
Issue VIII
Issue IX
Issue X
Issue XI
Issue XII
Issue XIII
Issue XIV
Issue XV
Issue XVI
Issue XVII
Issue XIX
Issue XX
Issue XXI
Issue XXII
Issue XXIV
Issue XXV
Issue XXVI

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A well-functioning Audit Committee is the key to achieving good governance

Based on the new rules and regulations on auditor independence and board responsibilities, all audit committee have to update their charter, composition and configuration to comply. We suggest that a review, assessment and evaluation of the impact, principles, practices and functions must be conducted, before the new regime goes into effect. At the Audit Committee events in Copenhagen and London, participants will receive three different tools to implement, adopt or update the new requirements.

As part of change mangement procedure, based on past experience we have developed three Audit Committee assessment tools to assist the committee members with practical guidance, review and tips based on the performance of audit committee's from a recent survey.

Findings of the Survey
The functions of the audit committee have developed by leaps and bounds since the responsibility trusted on them by the Sarbanes-Oxley Act of 2002. Initially the audit committee was primarily responsible for local oversight of accounting, financial reporting, internal controls, and audits. Now most audit committees have too much on their plates. Inspite of the added responsibilites the survey shoes that most audit committees have come to grips with the added compliance and governance burdens and risk management stakeholder demands.

Effective Audit Committees
The Audit Committee (AC) survey or assessment revealed that there was a need to ensure that the necessary audit committee structure was in order. Some of the most common findings:

Update the AC charter. Prepare a document based on the scenarios on how to the AC adhered to the current charter. The report should re-establish audit committee role, authority, and responsibilities. It is often a plus that the skills and experience of AC members must be updated to reflect the new responsibilities.

Update the composition and characteristics; Audit committee members do possess the necessary competencies for the AC to perform its duties and function effectively based on the charter; however it is advisable to define the critical success factors so that there is both a benchmark and a threshold to the KPI's.

Healthy Habits
Update the agenda: The annual priorities of the AC should reflect those core values of the organisation. These values could also be based on the policy or mission statements. In particular cases, the AC have provided written procedures on how to embrace an open dialogue based on the IT issues in the organisation. Another finding of the survey was the need to get guidance on how to enter into mediation or warranted conflict resolution based on the interests or qualifications of the committee members.

In some cases, there was a need to develop formal procedures on how committee members can relate back to the charter when unusual circumstances or even disputes require the need for expertise to be invited (as it is possible under the new law) or offer "safe haven".

By and large, the survey shows that AC have significantly improved because they have to capability to ask penetrating questions, are involved in setting the GRC agenda, and continually review the company's vision, core values, and critical success factors.

The tools/templates given at the two conferences are;
Audit Committee Annual Member Evaluation Tool
Audit Committee Annual Evaluation of the External Auditor Tool
Audit Committee Annual Survey Tool