The audit committee charter is a document that is designed to illustrate common or leading practices. The main purpose of this is to encourage customization. It comprises the following parts.
The Audit Committee charter is supposed to have certain organizational principles, which should ideally provide an introduction, background, purpose, mandate, authority, composition, information about the chair, terms of office, and quorum.
In addition to the organizational principles, it can be seen that it is required to have Audit Committee values, Communications, Work Plan, Meeting Agenda, Information Requirements, Executive Sessions, Preparation & Attendance, Conflicts of Interests, and Orientation and Training.
Within the realm of operational procedures, there are a couple of aspects that need to be incorporated.
They mainly include meetings, minutes, required attendance, secretariat services, remuneration of committee members, responsibilities, values and ethics, organizational governance, risk management, fraud, control, and compliance.
OVERSIGHT OF INTERNAL AUDIT ACTIVITY AND OTHER ASSURANCE PROVIDERS
This part of the document is mainly designed to ensure that there is proper clarity regarding the overall job descriptions that need to be followed, particularly in the context of ensuring that there are no issues when it comes to reinforcing and further implementing the internal checks and balances that are already in place.
In this regard, there are a couple of things that are important. They include internal audit activity, external audit activity, financial statements, and public accountability reporting, other responsibilities, and reporting on audit committee performance.
Despite the fact that this list is not entirely exhaustive, yet it can be seen that there are a couple of aspects that need to be overseen in order to ensure that there is proper clarity of information, as well as roles mentioned in the charter itself.
The main premise behind such a document is enabling the organization to have a foolproof system in place that can identify respective roles for the Audit Committee members, and ensure that they are able to make a positive contribution towards the organization.
From an external point of view, it can be seen that the overall information disclosed in this particular charter help the external stakeholders to get an understanding regarding the internal state of affairs of the organization.
It can be seen as a very vital trust-building tool, that can help external stakeholders to ensure that there is a proper system in place, before they are ready to invest in a company.
Moreover, this Charter forms to be a performance tracker too, since it identifies the aspects that need to be covered by the audit committee.
End of the year, this can further be evaluated by the Board of Directors in order to ensure that there are no loose ends, which have a chance of deterring the overall reputation of the company, to say the least.
Therefore, having a document to track all such aspects becomes increasingly integral, especially in modern-day and age where it gets increasingly hard to establish proper and viable communication tools for the organization.