The role of Audit Committee in corporate governance cannot be overemphasized.
i) What should be the composition of an Audit Committee? [4marks]
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1) The audit committee should comprise at least three directors, the majority of whom should be non-executive.
2) The membership of the audit committees should ideally comprise directors with adequate knowledge of finance, accounts and the basic element of the laws under which the corporate body operates or is subject to.
3) The chairman of the committee should be a non-executive director.
4) The managing director/chief executive officer , the finance director, the head of internal audit and a representative of the external auditors should ordinarily be invited to attend meetings
ii) Explain FOUR (4) functions of an Audit Committee. [6marks]
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1) Recommend the appointment of the external auditors of the corporate body;
2) Liaise with the external auditors for the purposes of maintaining and ensuring audit quality, effectiveness, risk assessment, interaction with internal auditors and dealing with situations governing the resignation of the external auditors and dealing with situations governing the resignation of the external auditors;
3) Review with the auditors their report on the financial statements of the corporate body;
4) Review the adequacy of systems and internal controls and of the degree of compliance with material policies, laws and the code of ethics and business practices of the corporate body;
5) Provide a direct channel of communication between the board and the external and internal auditors of the corporate body, accountants and compliance officers (if any) of the corporate body;
6) To report to the board on all issues of significant extraordinary financial transactions;
7) To assist the board in developing policies that would enhance the controls and operating systems of the corporate body.