- 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]
5.7. Audit Committee arrangements in small entities
A number of FMA and CAC entities required to establish an Audit Committee are very small, some employing less than 10 staff. There can be practical difficulties associated with such entities establishing a viable and effective Audit Committee. There may be merit in these entities exploring ways of entering into contractual or other cooperative arrangements with other entities within their portfolio to meet, in a cost-effective way, their legislative obligation to establish an Audit Committee. This could be done, for example, by sharing members and support services with another committee.
In circumstances where a committee acts as an Audit Committee for more than one entity, it is important that each committee has its own charter and membership and separate minutes be kept for each committee and provided to the Chief Executive of each entity. These arrangements will provide evidence of compliance with section 46 of the FMA Act. The committee should also consider if any issues regarding potential conflicts of interest arise as a result of sharing information among entities.
For example, the audit committee arrangements could involve:
- the Audit Committee of the large entity (entity A) having as the last agenda item the Audit Committee meeting for the small entity (entity B);
- attendance for this agenda item including one or more members appointed by the Chief Executive of entity B, together with observers;
- one or more members and observers of entity A leaving the meeting (Note: it would be preferable if the Chair remained the same person for both committee meetings);
- the Chair of the Audit Committee formally closing the meeting for entity A and opening the meeting for entity B; and
- the secretariat preparing separate minutes for both audit committees and distributing them to members of each committee.
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Next: Contractual arrangements and remuneration