The audit committee is an integral part of the overall organization when it comes to execution and analysis of issues that impact the overall organization in terms of its functioning and overall performance.
There are certain roles that are expected of the Audit Committee, and they are expected to abide by them in order to have definitive clarity regarding the overall nature of work that is expected of them.
For example, the audit committee is expected to inform the external auditor about any issues that bother them in terms of the overall functioning of the organization.
However, in order to achieve the expected roles, it can be seen that there are a couple of issues and aspects that the audit committee should follow in order to ensure that they are able to meet their targets and deadlines. Some of these ‘best practices’ are mentioned below:
Audit committee work plan:
This helps the audit committee to ensure that they are able to contribute positively to the organization. However, in order to do so, it gets rudimentary to get a basic understanding of the overall tasks and objectives that need to be fulfilled.
Regular meetings:
Communication and effective coordination is the key to success in this regard. Regular meetings are supposed to be conducted in order to ensure that there is proper clarity regarding the overall issues that need to be tackled so that a practical solution can be devised in order to get the best results.
Interaction with the audit firm:
Cooperation with the audit firm is also a very crucial and integral part of this case. This is essential because of the fact that there are numerous issues regarding which the auditor has more knowledge and expertise.
Therefore, in order to remove any what-ifs or confusion, it is required of the audit committee to establish a smooth working relationship with the audit team.
In-camera meetings:
As a matter of fact, it can be seen that no meeting of the audit committee is complete without a series of in-camera meetings with the external auditor, management, and committee members only.
In this regard, it is the chairperson’s responsibility to include these meetings on every audit committee meeting agenda and ensure that sufficient time is set aside for them at each meeting.
Disclosure of audit fees:
Clause 49 II (D) empowers the audit committee to recommend to the board the audit fees to be paid to the statutory auditors and approve payment to statutory auditors for any other services rendered by them.
Statement of corporate governance practices:
The revised clause 49 of the listing agreement with the stock exchanges in its Annexure VI suggests that the following be included in the Report on Corporate Governance in the Annual Report of the companies with reference to the audit committee.
Evaluation of the external auditor:
The fundamental responsibility of the audit committee is to evaluate the external auditor’s performance.
Clause 49 empowers the audit committee to recommend to the board, the appointment, re-appointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees and approval of payment to statutory auditors for any other services rendered by the statutory auditors.
