Audit Committee

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With respect to composition and structure of audit committee, the size of audit committee is depend upon the needs and culture of the company as well as the degree of delegated responsibilities to the audit committee. Majority of the companies have no rotation policies for committee members. However, it is critical to assess each member’s performance to determine whether the expectations of boards and committee are meet. Keystone of committee’s effectiveness is independence of audit committee where decision and judgement are significant especially when overseeing financial report integrity and areas assessment. Appointment of audit committee members and changes in membership need formal approval of the board and CEO or CFO of the company should not be members of the audit committee, but can be invited to attend the meeting to resolve critical issues. Consideration of personal qualities and business experiences should be balanced when deciding the composition of audit committee. Sometimes, external advices is more appropriate instead of retain particular expertise within the audit committee. (Audit Committee Institute, n.d.)

Activities of audit committee included monitor the integrity of financial statement and review the reporting decisions. Next, they also review the internal financial control systems and risk management system. Moreover, review the effectiveness of internal audit and review the independence, objectivity and effectiveness of external auditor are also activities of audit committee. They also develop policy on taking non-audit service from the external auditor and review the strategies of the company for fraud detection and whistleblowing. (Leung et al. 2011)

Problems that may occur with audit committee may be failed to keep up with latest accounting standard. Usually, there would be little changes in Financial Reporting Standard every year. Therefore, there might be a problem to keep up with the latest framework. Also, cybersecurity may be one of the problems. Since the universality of cyber-attack interfaces them to financial control, audit committee should consider what the general system is and overall planning for shielding resources from cyber-attack. Audit committee may also face a problem of failed to oversight the financial risk. In spite of the fact that this is the responsibility of senior management, audit committee should as well focus on the area of financial risks in order to address them. Since other sources of risk may cause financial risk to occur thus audit committee with relevant financial experience should take action to avoid the reactive situations. (Deloitte Risk Journal Editor 2014)

Overall, effective audit committee should be run and forms as it really means to an organization.

Sincerely,

Wendy Lau

Angel Chang

(738 words)

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References

Audit Committee Institute, n.d., “Creating an effective audit committee”, KPMG, viewed 20 May 2016

Deloitte Risk Journal Editor, 2014, ‘Top Issues for Audit Committees in 2014’, The Wall Street Journal, viewed 22 May 2016

Financial Reporting Council, 2015, Enhancing Confidence in Audit: Proposed Revisions to the Ethical Standard, Auditing Standards, UK Corporate Governance Code and Guidance on Audit Committees, viewed 22 May 2016

Leung, P, Coram, P, Cooper, BJ & Richardson, P, 2011, Morden auditing & assurance services, John Wiley & Sons Australia, Ltd, Australia