The role of the audit committee in the modern corporate world has been of primitive importance over the past few years.
As a matter of fact, it can be seen that an audit committee is one of the major operating committees of a company’s board of directors that is primarily responsible for overseeing financial reporting and disclosure.
The best audit committees can be described as those which are able to set a considerable and appropriate tone at the top where the prime focus is on ensuring that the organization is able to act in favor of the best interests of its stakeholders.
However, this can only be made possible in environments where there is proper in-depth knowledge, integrity, and people with staunch and unbiased approaches in the form of the audit committee, senior management, and other leadership levels.
Essentially, these members are ideally supposed to bring along a well-grounded knowledge of the industry, general business and financial knowledge and experience and further application-related knowledge to apply such within the organization they are a part of.
Furthermore, the committee is also supposed to have clarity about the overall organization and its inherent risks, which mainly exist as a result of regular involvement and communications within the management, particularly with the auditors, both internal and external.
Therefore, in this regard, it can be seen that the best audit committee members are able to maintain a high degree involvement in the overall state of affairs, which can help them to be active decision-makers in the overall process, in a constructive manner.
The Audit Committee’s Relationship:
In addition to the overall characteristics of the audit committee that has been mentioned earlier, it can also be seen that there are a couple of additional features that need to be accounted for when it comes to selecting the relevant audit committee.
In addition to that, it is also imperative that these expectations from the governing body are also well-defined and properly put across in order to eliminate any confusion that might otherwise exist.
Furthermore, the audit committee’s overall involvement in the financial reports, for both preparation and presentation is also highly crucial. Therefore, it is expected that the overall relationship that is maintained with the audit committee is transparent to a very high extent.
In this regard, the best practice for the audit committees is to ensure that the audit committee members are independent of management.
This would help them to be truly objective and unbiased in the discharge of their duties. Additionally, for the audit committee, to be truly effective, they must be able to resist any attempt by management to compromise financial reporting.
The relationship that exists between the Audit Committee and the management can be described as counterparts in order to ensure that there is smooth functioning within the organization when it comes to integral issues that might hinder the performance, and eventually the repute of the company if not taken care of in a proper manner.