MANAGEMENT

Audit Committee

Auditing Committee

Introduction

Auditing refers to a process of a systematic review of the financial statements, records and operations in order to determine whether they are in compliance with accepted accounting practices, the policies formed by management and any other legal requirements or gladly accepted. The audit aims to determine the correctness, completeness and authenticity of the financial records, statements and other documents filed by administrative and accounting management, and to suggest administrative and accounting improvements.

Discussion

The purpose of the audit committee is to provide oversight of both the external and internal audit function, as well as provide oversight of the process of preparing annual financial statements and public reports on internal control. In view of the complexity of the modern corporation and the increased demands for corporate accountability, the audit committee's role has become an increasingly important consideration in the conduct of corporate affairs. An audit committee is typically a standing committee of the board with mostly non-officer directors.

In contrast to the other standing committees of the board, such as the executive or finance committees, the audit committee is unique because it consists of' outside or independent directors. Independent directors are individuals who are not directly involved in managing the corporation. For example, the chief financial officer and chief executive officer are serving managing directors because not only are they intimately involved in managing corporate affairs, they are also employees of the corporation. Thus, the independent audit committee is composed of individuals who are non-management directors.

Rights and Responsibilities of the Audit Committee

As the audit committee concept has become more broadly accepted, the role of the committee has expanded considerably. Although the FRC and stock exchanges mandate that certain responsibilities be assigned to the audit committee, there is no complete set of the audit committee responsibilities or duties mandated by legislation or regulation: thus, the responsibilities vary from company to company (Braiotta , 2010 ,pp.131-139). The responsibilities of the audit committee should be focused on the needs and unique culture of the company that the committee serves.

Responsibilities assigned via the audit committee charter are dependent on factors such as requirements established by law, rule, and regulations: stock exchange listing requirements: the size and structure of the company; the industry in which the company operates activities delegated by the board of directors to other board committees: capability and time commitment of committee members: and the age of the committee.

When boards of directors delegate responsibilities to audit committees, they should follow three fundamental principles:

The board should make sure that all duties and responsibilities required by law, rule, regulation, or listing standards to be assigned to the audit committee (or. if permitted, to another appropriate committee of the board) are assigned.

Each company should set the audit committee's responsibilities according to its unique culture and needs.

The audit committee should not be overloaded with activities or the committee may lose sight of its main objectives or perform its duties superficially.

The third principle is especially important if the board of directors has recently created the ...