The audit committee includes specialized members who are externally hired independent directors of the company.
They keep an overview of the executive directors and review the company’s financial reports and their performance.
Audit committee reports are the reports published by the audit committee of the company, which gives an overview of the company’s accounting process, financial reporting process, the auditing activities, a report on internal controls policies and efficiencies, and compliance with the legislation and rules and regulations of the local authorities.
Purpose of audit committee report:
The information in the audit committee report varies by the nature and industries of companies.
The audit committee members and the executive management, therefore, reach a point to decide what should be the information included and how is it presented.
The audit committee report includes items such as what the company intends to do in the next financial year so they will create an annual plan.
They will also discuss the factors affecting the independence of the audit committee and what factors will impact the output efficiencies of the company such as budget and actual results comparisons.
However, the primary responsibility of the audit committee is to look at the financial reporting process, internal controls, and external auditing activities, therefore, the audit committee report’s major part will include these.
Process of audit committee reports:
Audit Committee reports are published quarterly so timely information is provided to senior management and shareholders of the company. these reports are scheduled quarterly which delivers the following information.
The report delivered in the first quarter will give an outline of the external audit findings and internal controls and compliance procedures and issues provided by the external auditors.
The second quarter audit report will highlight whether the recommendations provided by the external auditors are followed by the company.
They will also discuss the constraints to the company and how will they affect the company’s operations. The third-quarter report tends again to the external audit activities while in the fourth quarter the report looks at the mission, objectives, and goals of the company for the future.
Outcomes of audit committee report:
Improvement of performance of the company:
While the audit committee report is published every quarter and annually, there are expectations of useful outcomes as a result of them. These reports serve a purpose and that is why the members of the committee plan its purposes and arrange the report focusing on those results.
When the audit committee hires and takes recommendations from the external auditors, these recommendations are addressed in the audit committee report to shareholders and the owners of the company.
Financial reporting process:
Other than that, when the audit committee publishes a report, they include the current financial reporting process and its efficiency.
The management of the organization will, therefore, focus on how to improve the financial reporting process which could fulfill the purpose of stakeholders and the owners of the company.
Internal controls and internal audit function:
The audit committee’s responsibility is to overview the company’s internal controls process and how independent the internal audit function of the company is.
While completing this responsibility, they issue a report on the efficiency of internal audit and internal controls procedures along with recommendations to improve them.