- Foreword and Introduction
- 1. Introduction
- 2. The Audit Committee’s functions and responsibilities
- 3. Membership of the Audit Committee
- 4. Relationships with key stakeholders
- 5. Conduct of the Audit Committee
- 6. Assessment of the Audit Committee’s performance
- Part 2
- Part 3
PDF of Checklists And Proforma [0.5MB]
The Chief Executive/Board has a key role in supporting the effectiveness of the Audit Committee, and establishing active support amongst senior management is vital to the success of better practice Audit Committees. As an Audit Committee is established to assist the Chief Executive/Board to discharge their responsibilities, it is important that the committee through its Chair has an effective relationship with the Chief Executive/Board and key stakeholders. The committee Chair should develop a sound working relationship with the Chief Executive/Board that builds the respect and confidence that allow for effective communication.
Better practice tip: Escalation of issues to the Chief Executive/Board
It is important that the Audit committee Chair:
- brings to the attention of the Chief Executive/Board high risk areas or issues that the committee considers are not being effectively managed; and
- provide advice to the Chief Executive/Board on key issues raised by internal audit, external audit or parliamentary committees.
Formal and informal reporting mechanisms should be in place with the Chief Executive/Board to facilitate the Audit Committee reporting on the committee’s activities, key risk areas , and internal and external audit coverage. Reporting requirements should be summarised in the Audit Committee charter.
To meet its responsibilities under FMA Regulation 22C, the Audit Committee of an FMA agency should also prepare formal advice to the Chief Executive on:
- the agency’s internal audit plans;
- the professional standards to be used by internal audit;
- any matter of concern, significant opportunities for improvement or good practices identified in internal and external audit reports;
- the preparation and review of the agency’s financial statements; and
- any advice the committee has about the Chief Executive’s obligations under the FMA Act.
For formal accountability purposes it is also expected that the committee would, at least once a year, report to the Chief Executive/Board on its operation and activities during the year. The report could include those matters listed below.
Audit Committee report to the Chief Executive/Board
The committee’s report could be expected to include:
For many committees the most effective communication with the Chief Executive/Board is for the Audit Committee Chair to brief the Chief Executive or Chair of the Board following each committee meeting, which may be orally or in writing.
In recognition of the legislative requirement to establish an Audit Committee, consideration should be given to reporting the Audit Committee’s activities in the entity’s annual report. This could include membership details, and a summary of the main issues the committee addressed during the year.
Better practice tip: Audit Committee briefings
The Audit Committee will obtain periodic briefings from the Chief Executive/Board on strategic internal and external developments affecting the entity. The briefing could include details of issues such as emerging risks, significant projects or programs, restructuring plans, legislative changes and major policy developments.
The committee should be able to report to the Chief Executive/Board on any other matter it considers of sufficient importance to do so. In addition, at any time an individual committee member may request a meeting with the Chief Executive/Board.
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