Walk the line
Discussions and insights with leading audit committee members
In an increasingly interconnected world with internationalisation of the business environment and major markets, it is important to invest time in forging collaborations.
The Institute of Chartered Accountants in Australia, the Institute of Chartered Accountants of Scotland and the Financial Reporting Council in the United Kingdom have collaborated to present an international view on the role of audit committees in helping their boards discharge their financial and fiduciary responsibilities to shareholders.
Our joint project involved direct meetings and telephone interviews with chairmen of audit committees and boards in different jurisdictions around the world, but with a particular focus on companies based in Australia and the United Kingdom. We would like to take this opportunity to thank each of the participants, listed in Appendix 2, who so generously gave up their time to contribute to this paper. We would also like to acknowledge the assistance of the UK Audit Committee Institute for arranging and participating in many of the interviews.
The thoughts, insights and opinions presented in this paper certainly reiterate the pivotal role played by the audit committee in assisting the board of directors in enhancing the transparency and integrity of financial reporting. The paper highlights the importance of the committee having a clear remit and the right mix of skills and experience, and of the relationships it forges with management, the auditor and the rest of the board of directors to create a culture of open and frank discussion. It is this open debate and mature questioning that are fundamental to the effectiveness of the audit committee.
A strong sentiment prevails among audit committee chairmen we interviewed: their role and responsibilities are well understood and there is a clear understanding of the leadership, knowledge and accountability needed to provide for their committees to operate effectively. This suggests that a major overhaul of the remit and the composition of audit committees is probably not necessary. But challenges still remain, not least how to communicate meaningfully to shareholders what audit committees are doing to protect their interests.
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