The ACI has developed a Toolkit that provides examples of reporting and documentation requirements. The Toolkit, which is being continually enhanced, will need to be adapted to the circumstances of individual audit committees and companies.
Audit committees are generally timed to meet financial reporting and audit cycles. There should be as many meetings as the audit committee's role and responsibilities require, varying due to the range and complexity of the issues under discussion.
A comprehensive (but not exhaustive) list of issues that can be covered in each audit committee meeting is provided below. Of course, this agenda should be tailored to the individual circumstances of the company.
A checklist framework for an audit committee to carry out a formal review of the effectiveness and efficiency of their external auditors can yield useful information. Such a review provides the audit committee with a disciplined approach to keeping the auditors' performance under review. It will also help to ensure that the auditors remain alert to the company's needs and to maintaining an appropriate relationship with the executive management, the audit committee and the board as a whole.
Annual reports and accounts should contain a separate section that describes the role and responsibilities of the audit committee and the actions taken by the audit committee to discharge those responsibilities. The ACI toolkit provides a suggested outline for such a report.
It is recommended that, in addition to reviewing its term of reference, the audit committee should review its own effectiveness annually. The ACI toolkit provides a suggested framework for such a review.
A similar checklist framework for an audit committee to evaluate their internal audit function. Such a review should be based on the audit committee's own experience as well as management and the external auditors. In addition, the head of internal audit should provide a self-assessment. This process may identify other issues relating to the audit committee's own performance, or the performance of management or the external auditors.
The specimen terms of reference in the ACI toolkit contain a number of detailed activities that should be considered by companies. If tailoring these terms of reference to the particular needs and circumstances of their company, boards may not consider this level of detail to be required. Nevertheless, the terms are indicative of good practice.
With companies of every size and industry wrestling with the challenges posed by the current financial crisis, the audit committee agenda must now perhaps zero in on survival rule number one: helping their companies get through the next 18 months.
Recent surveys by member ACI's