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 aim of an audit committee is to improve organizational governance, regardless of whether the organisation is in the private or the public sector. As a subcommittee of the governing body, an audit committee aims to provide assurance on financial and compliance issues through increased scrutiny, accountability, and the efficient use of resources. An audit committee may also serve an advisory function aimed at performance improvement within the organisation (Neal 2003, pp. 95).

Over the past decade, the role of audit committees has become increasingly relevant due to the high-profile corporate scandals such as Enron and WorldCom have intensified corporate governance requirements and expectations. 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.

The Place and Role of the Audit Committee

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. At the identical time, the undertakings of the review managing assembly, as direct, proceeds far after the oversight of the value of economic reporting.

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 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, pp.40). As a result of activities undertaken by the Committee, the members of the board of directors create a better understanding of accounting systems of company's financial status and control, and management actions for their maintenance and improvement. Internal Audit Committees increases the efficiency of the interaction between external auditors and the board, especially on significant ...