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Tutorial 8

Question 9

How do you ensure the independence and effectiveness of the audit committee?

* Have a position description and assess the performance of the audit committee

* The position description for the audit committee should include best practices and regulatory requirement.

* Considering the position description and the competencies and skills of the audit committee, provides feedback and take timely, corrective action required to the audit committee.

* Audit committee members understand the rationale for management’s choices and the implications for financial manipulation

* Audit members must understand how such transactions require the judgement and choices management make, including the selection and application of critical accounting policies, judgements and estimates, and the potential for manipulation of financial statements.

* Ensure that audit committee independence is real as well as perceived

* Audit committee must have independence of thought, judgement and action to voice their own opinions and not allow their trust in relation with management.

* Have agenda ‘mapping’ and effective committee documentation and reporting from the audit committee to the board

* There should exist sufficient time between the audit committee meeting and board meetings to allow any issue arising to be carried out prior to reporting to the board. (Eg, reviewing minutes, developing matters for information, recommendation or decision.)

* Have proper reporting relationships between management and the audit committee

* Audit committee should have positive working relationships with reporting senior management that are honest, transparent, constructive, and accountable to the audit committee to ensure the integrity of financial reporting.

* Have a strong internal audit reporting directly to the audit committee

* The audit committee should concern it; internal audit is independent from...