Overview and Responsibilities of Audit Committee
Overview of Audit Committee in Corporate Governance
The audit committee assists the board of directors to fulfil its Corporate Governance and overseeing responsibilities concerning the financial reporting process, the audit process, company practice of internal controls, the performance of the internal audit function, independence of the external auditors, and compliance with relevant laws and regulations.
The audit committee consists of members of a company’s board of directors. The Audit Committee is made up of typically three non-executive directors which at least one should have recent financial experience.
The creation of an effective audit committee is an important way of enhancing corporate governance and oversight. The committee reviews the results of an audit with management and external auditors.
Responsibilities of Audit Committee in Corporate Governance
Following are the General Responsibilities of Audit Committee,
- Responsibilities of Financial Reporting Process
- Analysis of the important judgments and issues made by management in the financial reports.
- Review the quarterly and audited annual financial statements of the company.
- Ensure that the financial reports are accurate.
- Discuss and analyze the complex accounting estimates and judgments made by management
- Discuss the implementation of new accounting principles or regulations
- Interact regularly with senior financial management (CFO, Financial Controller, etc..) and have authority to comment on the capacities of these executives.
- Responsibilities of Overseeing the External Auditor
- Audit committees usually approve the selection of the external auditor.
- Audit committees usually approve if a change of the external auditor happens.
- Ensure the external auditor is independent with no conflicts of interest with the auditor’s ability to issue its opinion on the financial statements.
- Audit committees meet separately with external auditors to discuss matters that the committee or auditors believe should be discussed privately.
- Responsibilities of Overlook the Regulatory Compliance, Policies, and Processes.
- Ensure that appropriate policies and processes are in place for the identification and prevention of fraud/corruption.
- Discuss actions or regulatory compliance risks with management.
- Verify that managers are using the correct internal policies for financial reporting related to; business regulations, financial reporting policies, accounting policies, and risk control policies.
- Responsibilities of Overseeing the Internal Auditor
- Appoints, overlooks, and compensates the independent auditor.
- evaluate their performance, and include any performance-related issues in the report presented to the board.
- hold separate meetings with the internal auditors if required.
- responsible for the appointment, compensation, and oversight of the work of the auditor.
- General Best Practices of Corporate Governance
- Approaches/Forms to ensure Corporate Governance