Obligatory Audit Committee?

The obligation to establish an Audit Committee by the end of 2009 was introduced for so-called “public interest entities” as defined by the new Act on Auditors effective as of 14 April 2009. The Act on Auditors implements the EU directive regulating statutory audits. In connection with the Audit Committee, it regulates the obligation of companies to establish the Audit Committee, its composition, requirements on its members, and its powers within the company’s internal and external audit. This section of the Corporate Governance Centre’s web site provides the relevant information regarding the functions and duties of the Audit Committee and its members.

 

 Role of the Audit Committee

The Audit Committee plays a key role in creating compete and accurate accounting books and records for the company. Public interest entities are obliged to have an Audit Committee provided that none of the below-mentioned exemptions from this obligation apply. The obligation to establish an Audit Committee arises from Directive 2006/43/ES and was integrated into Czech law by the Act on Auditors, effective as of 14 April 2009. Companies that fall under the definition of a public interest entity as specified by the Act on Auditors were obliged to establish the Audit Committee by the end of 2009.

 

Public Interest Entities

Directive 2006/43/EC defines public interest entities as entities governed by the law of the Member State and whose transferable securities are admitted to trading on the regulated markets of any Member State, credit providers or insurers. Under Directive 2006/43/ES, the Member States may designate other entities as public interest entities; for example, those entities that are important in terms of the public interest due to the nature of their activities, their size or the number of their employees.
Publication date: 10/2011 | File size: 3.8 MB

 

Composition of the Audit Committee

The law requires that the Audit Committee have at least three members, who are to be appointed by the company’s supreme body, i.e. by the General Meeting. The Articles of Association and the Memorandum of Association may designate a higher number of members for the Audit Committee. The members of the Audit Committee may either be the members of the Supervisory Board, performing this function simultaneously with the function of the member of the Supervisory Board, or third persons.
Publication date: 10/2011 | File size: 3.8 MB