- Evaluate the competence and independence of the external auditor, especially of the partner who is leading the team. This is important for instance when the auditor involves himself in assisting the client in preparing accounts.
- Probe to find out the nature and extent of issues management and auditors give considerable attention to. The committee should especially wary of the areas of conflict between management and the auditor.
- Address issues to do with hiring and firing of staff. In the event of management hiring former employees of the company‘s audit firm into key positions, the audit committee should look into the matter.
- Keep management on their toes when it comes to implementing the recommendations of both the internal and external auditors.
- Ask and receive frank assessment of the competence of the financial management team.
- Question and enter into discussion with management on key financial policies and the need, if any to alter or review the existing ones.
- The audit committee should be the champions of corporate codes of conduct.
• Act as an effective overseer of the financial reporting process and company internal control
system. E.g. it should be involved in review of company’s internal control procedures.
• Reviews quarterly, semi-annually and yearly financial statements of the company focusing
particularly on any changes in accounting practices, significant adjustments arising from
the audit, the appropriateness of the going concern assumption adopted in preparation of
the financial statements and whether the financial statements comply with IFRSs and other
relevant regulations.
• Consider the appointment of the external auditor, the audit fees charged and any questions
regarding resignation or dismissal of the external auditor.
• Discuss with the external auditor before the audit commences the nature and scope of the
audit and ensure that the work is properly coordinated.
• Review management evaluation of the factors related to independence of the external
auditor. Both the audit committee and the management should assist the external auditor in
preserving his independence.
• Discuss problems and reservations arising from the audit and any matters that the external
auditor may want to discuss.
• Review any communication between the external auditor and management. Such
communication should include management letter issued after the conclusion of the audit.
• The committee considers any related party transactions that may arise within the company
and ensure that related party transactions are appropriately disclosed in the financial
statements in accordance with ISA 24 Related Party Disclosures.
• Consider major findings of any internal investigations undertaken and the management’s
response to the findings.
• The committee has exclusive authority to investigate any matter within its terms of reference
and management must provide access to the necessary information and any resources
required.
• Considers other issues as defined by the board of directors including regular reviews of the
capacity and effectiveness of internal audit function.
Wilfykil answered the question on February 22, 2019 at 12:15
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