The distinct requirements of the Audit Committee in the Companies Act
According to the ABL, all listed companies must have an audit committee. The ABL, in rule 8:49b outlines that the role of the audit committee, without affecting the responsibilities and duties of the board, is to:
- Monitor the company's financial reporting
- Monitor the effectiveness of the Company's internal controls, internal audit and risk management with respect to financial reporting
- Remain informed about the audit of group reporting and financial statements
- Review and monitor the auditor's impartiality and independence (including the provision of non-audit services)
- Assist in the preparation of the proposal of an auditor to the Annual General Meeting
According to the ABL, only directors may be appointed as members of the audit committee. That committee shall be composed of at least two members and cannot be employees of the company (for example, the CEO and executive chairman cannot be members of the committee). The company's audit committee is required to have at least one independent member with experience in accounting or auditing. In other words, there is no doubt that the law is imposing more strict demands on the composition of the audit committee than in the past.
The concept of independent members of the Audit Committee
Many companies are uncertain as to how to interpret the concept of "independent members". It is the board itself which ultimately determines the concept of an independent member. It is, however, generally accepted that an independent member should be independent in relation to the company itself, its directors and major shareholders. He or she should receive no remuneration from the company other than the receipt of fees relating to their position on the Audit Committee.
Formal qualification criteria for independent members with experience in accounting or auditing
There are no explicit requirements for formal training in accounting or auditing matters, but it is up to each company to decide which skills should be considered adequate. For example, experience in corporate management is considered sufficient to meet this requirement. However, it is of great importance that the committee has the composition and skills to make it suitable for such a mission. Therefore, the committee's members should consist of those directors who are familiar with the company's financial conditions and who are independent from management. This applies even in cases where there is no audit committee and instead the preparation work is performed by the entire board.
Audit Committee Resource Guide
The Audit Committee Resource Guide presents an overview of audit committee requirements for U.S. public companies and is a reference guide for seasoned and new audit committee members. In each section of the Audit Committee Resource Guide, Deloitte has outlined the rules set forth by the NYSE, the NASDAQ, the SEC, and other regulators, as well as leading practices and questions for audit committees to consider. Deloitte's new Audit Committee Resources application is available in the iTunes App Store.