Committee Best Practices
JULY 2008 -
Audit committees play an increasingly important role in the governance
of public and private organizations, both for-profit and nonprofit.
In April, RSM McGladrey held an information session on audit committee
responsibilities relating to internal controls and information technology
(IT). The presenters discussed current trends and baseline techniques
and best practices that any organization can use.
the quality of internal controls involves an organization’s
audit committee, executive management, and operating management.
audit committee’s role can include ensuring that the organization
follows these best practices:
and communicate a code of ethics.
a fraud-prevention program.
and communicate a whistleblower policy, including these steps:
the message simple.
using a toll-free ethics hotline maintained by a third party
(for some organizations, less than $1,000 per year).
whether communications are required in multiple languages.
a way to track the reported events, investigations, and resolutions.
uses the following questions to assess general audit committee
effectiveness, including compliance with the Sarbanes-Oxley Act
- Are a
sufficient number of audit committee meetings held, and are
the meetings of sufficient length and depth to cover the agenda
and provide healthy discussion of issues?
- How does
the audit committee constructively challenge management’s
planned decisions, particularly in the area of financial reporting,
and probe the evaluation of past results?
- Are regular
meetings held between the audit committee and the CFO, the chief
audit executive (CAE, the leader of internal audit team) other
key members of the financial management and reporting team,
and the independent auditors? Are executive sessions conducted
on a regular basis?
the audit committee receive key information from management
with sufficient time in advance of meetings to prepare for discussions
at the meetings?
a process exist for informing audit committee members about
significant issues on a timely basis and in a manner conducive
to the audit committee having a full understanding of the issues
and their implications?
- Is the
audit committee informed about personnel turnover in key functions,
including the audit team (both internal and the independent
auditors), senior executives, and key personnel on the financial
accounting and reporting teams? Are unusual employee turnover
situations observed for patterns or other indicators of problems?
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