Audit committees are a strong feature of the governance landscape. While all directors have a duty to act in the interests of the company the audit committee has a particular role, acting independently from the executive, to ensure that the interests of shareholders are properly protected in relation to financial reporting and internal control. It’s a potentially difficult role, standing at the crossroads of internal and external auditors as well as the Board of Management.
Yet the audit committee must be prepared to take a robust stand, and all parties must be prepared to make information freely available to the audit committee, to listen to their views and to talk through the issues openly.
In particular the audit committee should satisfy itself that there is a proper system for managing controls on a day to day basis. They do not need to monitor the controls – that is a task for the executive. Nevertheless it is quite an onerous obligation as it stands and it is hard to envisage any audit committee being able to discharge its responsibilities without at least knowledge of, and potentially access to, adequate systems of financial governance. Of course the corollary of this is that the company itself should have a modern system of financial governance.
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