Effective audit committees are integral to good governance over public sector entities.
A key element of effective audit committees is the existence of a strong and robust relationship with external audit.
This relationship should be built on open, regular and frank communication between the committee and the auditors.
The benefits of a strong relationship between the committee and the auditors can be two-fold:
While audit committees do not possess the power to direct how an audit is performed, audit committee meetings should provide a forum for promoting, supporting, and where appropriate, challenging audit quality. This can be achieved through monitoring, facilitating discussion and providing feedback on:
In discussing the above matters the committee should consider:
Further, an audit committee can assist in facilitating a quality audit process by ensuring:
The external auditors may be able to use their knowledge and experience to assist the committee in facilitating broader discussion on matters at committee meetings. This could include providing insights and contributing to discussions on:
Regular, two-way communication where relevant information is exchanged in a timely manner is important in ensuring both auditors and committee members can effectively discharge their roles.
It is considered better practice that external auditors are invited to attend all audit committee meetings for the whole of the meeting. Attendance by the external auditors should allow enough time to facilitate an appropriate discussion on key audit activities as relevant to that meeting.
Inviting the auditors to attend the whole meeting also allows them to contribute to discussions on other key matters discussed at the meeting. Further, while the auditors may be able to access audit committee papers and minutes outside of the meeting, attendance at the meeting allows them to obtain a fuller understanding of the matters discussed and actions proposed. It also ensures that all relevant information is available to them in a timely manner.
To ensure there is effective two-way communication, it is important that the auditors submit appropriate reports to the committee in a timely manner. In preparing and submitting these reports, auditors should provide the committee members with:
to enable them to understand the content of the report and identify potential lines of questioning for the meeting.
In addition to the normal attendance at audit committee meetings, the relationship between the committee and the external auditors can be enhanced through: