Role of Governance Audit Committee
Guidelines for sourcing Audit Services: The Company’s shareholders through the board are responsible for appointment of the Company’s external auditor. The governance Audit committee plays an important role on behalf of the board through design of guidelines to inform the procedures for attraction of the best audit service providers and to retain the services of the selected service provider.
Procuring and Pre-approval of audit services: The committee is further tasked with the role of procuring and pre-approval of audit services from a pool of potential audit service providers. It is the audit committee that does the selection on behalf of the shareholders regarding which firm to procure its services based on its competitive edge and the organizational, national and international accounting standards.
Auditor’s Plan: The Audit committee also plays an important role of reviewing of the independent auditor’s plan for an integrated audit of the annual financial statement. The Auditor is normally brought on board through a formal engagement and thus is accountable in terms of fulfilling his role as an auditor. Thus a plan by the auditor is very critical since it sets out the auditors deliverables, resources and the methodology deployed.
Review Audited Statements: As the Company’s stewards, the board through the audit committee is responsible for the review and scrutiny of the financial statements audited or reviewed by the independent auditor. It is a statutory requirement that the AGM discussions around the company’s financial performance are based on the audited accounts.
Auditor’s Independence: The audit committee is also responsible for the monitoring the auditor’s independence. Both the internal and external auditor is entitled to a certain degree of independence as set out by relevant statutes and international guidelines.
Auditor rotation requirement: There is always need to appoint a new auditor once the current auditor has served for a given number of terms. This is referred to as auditor rotation. The Audit committee is charged with the responsibility of developing and implementing guidelines on auditor rotation requirements. This helps in the determination on the conditions that must be fulfilled and when to appoint a new auditor.
Determination of Audit Fees: The Audit committee is in charge of the formal approval of fees for both audit and non-audit services with a keen focus on improving the quality of audit and non-audit services. It ensured that the proposed fees are reasonable at the same time ensure that it is able to secure quality services.
Review of Internal Controls: Internal controls are very crucial when it comes to ensuring that the organization is able to safeguard it assets and property as well as ensuring efficiency and effectiveness in organizational processes. It is the work of the audit committee to address any concerns or risks threatening the effectiveness of internal controls which by extension could affect audit activities and the quality of audit services.
Fraud Investigations: Sometimes in the organization, there could be allegations of financial fraud. It is the work of the audit committee to spearhead the investigations into allegations of financial statement fraud that has been brought to their attention and which has the potential to affect the integrity and reliability of financial statements and the effectiveness of a related audit
Making recommendations to the board: The audit committee can make recommendations to the board on matters related to audit and non-audit services for the approval by the Board.