Under the spotlight, audit committees must improve
The spotlight on audit committees has been white-hot as of late, leaving little room for relaxation.
But rather than squirm, audit committees should instead step up their game when it comes to audits. To that end, a group of corporate governance-oriented groups have published a guide as to how the audit committee should conduct their annual audit assessment.
"Each year, audit committees should evaluate the external auditor in fulfilling their duty to make an informed recommendation to the Board whether to retain the auditor. The evaluation should encompass an assessment of the qualifications and performance of the auditor; the quality and candor of the auditor's communications with the audit committee and the company; and the auditor's independence, objectivity and professional skepticism. To this end, this assessment questionnaire can be used by audit committees to inform their evaluation of the auditor (i.e., the audit firm, as well as the lead audit engagement partner, audit team, and engagement quality reviewer)."
This isn't the complete answer for audit committee bent on wrangling more value from their auditor, but it is a great place to start, especially for directors new to the committee, who may or may not be experienced in audit issues. The paper was published by the Association of Audit Committee Members, Center for Audit Quality, Corporate Board Member, Independent Directors Council, Mutual Fund Directors Forum, National Association of Corporate Directors and Tapestry Networks.
- here's the guide