AUDIT COMMITTEE

Audit Committee

Audit Committee

Introduction

Board committees facilitate the work of the board. Committee structures vary from nonprofits firms to profit seeking firms but typically include standing committees and task forces. When designing a board committee structure, care should be taken to ensure that (a) the board has a sufficient number of members and the necessary expertise to carry out the committees' respective assignments, (b) the organization has the capacity to support the committees' work, and (c) procedures are put in place to make sure that board committee work advances the work of the full board rather than usurps its responsibilities.

The perceived need for more audit committees has been galvanised through a combination of legislation and/or supported "best practice" guidelines. Evidence has shown a significant rise and harmonisation in the use of audit committees internationally, including the European Commission's requirement that all public-interest entities in the European Union must have an audit committee.

In many companies, the audit committee considers it useful to hold a meeting with the auditors during the audit and planning between the ends of the year. Thus, the committee has an opportunity to address significant problems in auditing and accounting and request permission to prepare the financial statements (Francis 2004, pp 345). In most cases, a committee review the privacy statements of income for the half year with management, and sometimes with external auditors, external auditors conducted if review of interim financial information, or have been invited to provide comments on the proposed change in accounting policy. The purpose of verification of such information is to ensure that accounting standards are adhered to and consistently applied, that the deviation of balances, indicators and statistics in the financial statements are explained in a satisfactory manner. The Audit Committee must ensure that the consolidated interim financial information for external reporting purposes meeting the requirements for disclosure of information, data on seasonal or other fluctuations in revenue, cost of sales or expenditures disclosed adequately, disclosed on significant commitments and contingent liabilities.

Theory and the Role of Audit Committee

The work of the Audit Committee provides significant benefits to the organization. The main advantage of the availability of the audit committee is to improve the independence of the board of directors, demonstrating the intention of directors to exercise due diligence in the study of financial reporting, corporate financial and operating policies, to assist the board in fulfilling its obligations under the law.

The Audit Committee is a managing assembly of the board of controllers and is conceived to supply added self-assurance in the value and reliability of economic data supplied to Council. This managing assembly is empowered to ascertain the inquiries that originate in all assembly companies. The Board of Directors is to blame for the correctness of economic statements.

The Committee helps to strengthen the role of independent directors and to increase their knowledge and understanding of financial statements. The committee raises attention to the portfolio of corporate risk, including levels of authority, sent to senior management board (Hatherly 2008, ...