Board Audit Committees I

What is the audit committee and its main responsibility?

The audit committee helps the board confirm the reliability of a company's financial accounts and oversees external auditors. The main reason why an audit committee is so important to a company is the vital role of financial statements and financial disclosure.

What are the other responsibilities of the audit committee?

Many audit committees will also be responsible for oversight of a company’s internal audit function, which  provides assurance to the board of the effectiveness of, and management’s compliance with, a company’s policies and procedures. When a company does not have a separate risk committee, the audit committee will often assume oversight of the management of risks that a company faces.

What are governance codes and how is audit committee responsible?

Depending on the jurisdiction of a company, there are rules that may be specified by the UK Corporate Governance Code and other standards, these are known as governance codes. It covers monitoring financial statements, recommending auditors, reviewing auditor independence, and developing policies regarding non-audit services.

What is the audit committee composition like and how should it function?

At least three independent directors and a separate chairman from the board. To summarise, audit committee's role is one of oversight, assessment, and review, rather than direct involvement in financial statement preparation or monitoring financial controls.