The Role of Audit Committee

The role of Audit Committee

The board cannot be expected to know all the organization of operating details but still ensure to have assurance that governance mechanisms are make working (Lybek 2007). That is the method and reason why company need to held a public account – audit committee.

Audit committee is a subset of the board of directors which increasingly play an important role to strengthen financial accountability (KPMG 2009). Audit Committee should balance and oversight internal and external auditors, finding the appropriate auditor. The paper will elaborate the responsibilities and functions of an audit committee and its influence on other parties such as internal auditor, external auditor. Also, it will put an actual company cases in some situations and analyze the responsibilities and functions of Audit committee have done in the listed company.

Audit committee is constituted by a number of non-executive directors who act as advisers. The basic requirement for the audit committee members is they tend to be conversant in financial, accounting matters, although not necessarily require experts. Establish an audit committee to enable it to exercise unbiased judgment and quest the critical question on internal controls, financial reporting, and risk management analysis (Richard 2000). Stakeholders might be received a full report from audit committee which covers their duties and findings, because audit committee is a sub-committee of the board which behalf of the board.

In actual case for instance, Halfords Group plc is a retailer of sports equipment and camping operating in UK. Company Audit committee’s members are all independent non-executive directors and each of the audit committee member have experience in financial matters. The company chairman will be invited t.

The responsibilities of the audit committee and its advantages are listed in following. The basic duty of audit committee is operate the internal controls and risk management system effectively, committee need to consider key issues of internal investigations and management’s response.  And also need to ensure the high quality and transparency of financial statements and disclosures that can reduce the opportunity for fraud. Audit committee not only review summary financial statements, but also monitors the company annual and interim reports. Audit committee need to oversee the internal auditor function to make sure the internal auditor effectiveness and assess the annual internal audit plan. Select and monitor the external auditor. Strengthen the internal and external auditors’ position. Audit committee also enables the non-executive directors play a fair-minded role (Group 2014).

On the other hand, audit committee gets involved in the internal and external auditors’ working. Audit committee might interfere in auditors’ judgment and limited auditors’ reporting statement. Furthermore, the Board might misunderstanding the audit committee advices or do not know an audit committee object, which can lead Board detracts their authority. The audit committee might be lacking the audit’s technical knowledge that result in additional cost to hire assistance, cost will be expensive.