By Dave Tate, CPA, Esq. - The Audit Committee Institute (see link below for ACI, and my list of audit committee attributes) lists 10 “To-Do’s” for audit committees to consider when planning their 2008 agenda. I particularly like item numbers 5, 6, 8, 9, and 10 which are:
5. Ensure there is a shared vision for internal audit.
6. Encourage (expect) frequent informal communications with the audit engagement partner. I would say, “Plan, schedule and expect . . . .”
8. Make sure the full board is aware of the audit committee’s activities and needs.
9. Assess the tone at the top and throughout the organization. Tone at the top is important for account function and financial statement integrity, but I would not use the word “assess” in a manner that might imply that the audit committee is formally responsible for making an evaluation. Additionally, tone at the top in general is an issue that should be considered at the full board level and should not be delegated solely to the audit committee.
10. Take a hard look at the audit committee performance (see additional link below for my audit committee performance evaluation overview).
The remaining ACI “To-Do’s” are:
1. Be a catalyst for improving risk management and oversight. Risk management is an aspect of the audit committee function, but I did not list this item above because the topic as stated is too broad and general, whereas I suggest that the areas of audit committee risk management oversight should be specifically defined.
2. Closely monitor management’s disclosure committee. Perhaps this “To-Do” is appropriate, but this issue also could be a board level responsibility, and I would say that if the board delegates this oversight to the audit committee (1) it should still be subject to continuing board oversight, and (2) it should be delegated only if there is an understanding regarding what the audit committee is expected to do to “closely” monitor the disclosure committee.
3. Be up-to-speed on fair value, IFRS, and other key financial reporting issues and developments. Yes, perhaps, but I would not necessarily single out this issue for special mention.
4. Make sure the CFO and the finance organization have what they need to succeed. I would say, exercise oversight of the accounting and finance, CFO and internal audit functions. Of course you want them to “succeed,” but oversight of those functions is defined by more specific criteria than just making sure that the CFO and finance functions have the necessary resources.
7. Be prepared for a crisis. I believe that this is an issue for oversight and planning by the full board.
For more information:
-My audit committee performance evaluation overview.
Dave Tate, CPA, Esq.