The Audit Committee performs an essential oversight function by ensuring management is providing accurate and transparent financial reports to investors and other interested parties. The Committee is not responsible for preparing the information, but it is responsible for oversight of the processes and procedures in place to protect stakeholders’ interests. The main method to accomplish this goal is the oversight of the financial reporting process including the financial statements, annual reports, call reports and earnings releases.
While the Audit Committee role continues to evolve with changing regulatory requirements and stakeholder expectations, it primarily has oversight responsibility for:
Financial Reporting Process
- Reviewing financial statements including management’s discussion of results to understand and seek clarification of significant variances from prior reports, budgets and forecasts.
- Reviewing independent auditor communications including their recommendations and management’s responses.
- Assessing the impact that accounting and reporting requirements may have on financial and regulatory reporting.
- Discussing succession plans for the CFO and financial reporting staff.
- Reviewing critical accounting policies including those over significant estimates, internal controls and compliance with FDICIA and/or SOX (if applicable).
Independent Auditor and Internal Audit Function
- Approving the internal audit department charter and ensuring it follows the Institute of Internal Auditors International Standards for Professional Practice of Internal Auditing.
- Approving the internal audit annual plan and scope.
- Evaluating and appointing the independent auditor annually and ensuring periodic rotation of the audit partner (if applicable).
- Evaluating the chief audit executive and ensuring the reporting structure is appropriate.
- Conducting private sessions with the independent auditor during regularly scheduled Committee meetings.
Ethics and Compliance
- Monitoring management for compliance with legal, regulatory and Code of Conduct requirements, and ensuring reported violations are investigated.
- Ensuring a chief ethics and compliance officer or equivalent is in place.
- Reviewing the whistleblower policy and investigative process for reported complaints, suspected fraud or other illegal acts.
- Focusing on financial risk to oversee and assess enterprise risk management activities and to ensure a member of the management team or separate risk committee is responsible for each risk category.
Ensure your Audit Committee activities are on target to strengthen oversight by filling gaps in processes and procedures. Consult with your Rehmann advisor for expert guidance or contact Kristy Clark at [email protected] or (248) 614-6446.
