The Audit Committee is a crucial element of any effective board, and with expectations of its role being under closer scrutiny than ever before, it is essential that members maintain an advanced skillset. Here, we highlight all the resources NEDs need for an up-to-date approach on keeping a successful Audit Committee.
The UK Corporate Governance Code outlines the need for an Audit Committee of independent NEDs, with numerous responsibilities that are crucial for clean and effective oversight.
Alongside ensuring that external auditors are independent - and that their relationship with the company’s executives never surpasses this status - the Audit Committee is also tasked with monitoring the process of preparing the financial accounts, reviewing the quality of the audit, and recommending a change of auditors where appropriate.
The Audit Committee also increasingly takes on the role of a risk committee, providing support and oversight for risk management and internal control systems of the organisation.
Serving as such a critical element of an effective board, the work of the Audit Committee can be incredibly demanding, particularly with pressure for members to give a substantial amount of time to their role over the financial year.
Moreover, in the context of corporate governance reforms, the audit committee has come under closer scrutiny than ever before, and expectations of its role are now much higher. It is therefore essential for members to keep the sufficient skillsets to perform their role effectively.
But what does an effective Audit Committee actually involve? With the final session of our Audit Committee Training on the horizon this month, we’ve decided to take deep dive on all the resources you need, whether you’re sitting on this crucial sub-committee, or just aspiring to work alongside one.
In particular, the NED Handbook (available with NEDA Premium membership) offers a comprehensive overview of the work of the Audit Committee, exploring its composition, chair, members, and external relationships, while exploring all the skills needed for efficient reporting and oversight. It is a one-stop guide to the necessary acts and provisions for the committee, as well as its annual cycle and requirements.
As a fundamental resource of the Handbook’s chapter, the ‘Checklist for an Audit Committee’ offers an insightful exercise for NEDs to check their knowledge. This checklist’s first section on General Requirements features questions like:
- Do the members of the audit committee have sufficient financial skills and literacy to do their work effectively?
- Are the committee members able to give sufficient time to the work?
- Does the audit committee review all important financial announcements by the company before their public release?
- Does the audit committee report to the board on how it has discharged its responsibilities?
- Does the audit committee provide advice to the board on the fairness, balance and understandability of the annual report and accounts?
- Has the audit committee investigated to its satisfaction the going concern status of the company?
- Does the audit committee carry out regular and rigorous reviews of the internal control system and risk management in the company? Is the system of regular reviews working successfully?
- Does the audit committee regularly confirm to its own satisfaction that the internal audit function is monitoring risk management and internal control systems efficiently?
- Does the committee meet with the head of internal audit without other executives present?
- Does the audit committee take the lead in the company’s relationship with the external auditors? Does it actively monitor the effectiveness and the independence of the external auditors, and the quality of the audit work?
With everything you need to know about these areas and more, the Handbook is well-worth reading for NEDs looking to stay up-to-date.
Additionally, our Audit Committee Training and Update will be running this October 24th, in association with the ICAEW. The half-day online session offers the perfect training for both experienced NEDs looking to brush up on their skills, and aspiring NEDs looking to develop their understanding, encompassing all the topics you need to know about the Audit Committee.
Learn More:
To read the full chapter in the NED Handbook (with NEDA Premium membership), follow the link here.
And to sign up for our final Audit Commitee Training session of the year, follow the link here. Discounts are available for NEDA Premium members.