The audit committee is established with the aim of enhancing confidence in the integrity of an organisation's processes and procedures relating to internal control and corporate reporting including financial reporting. Audit Committee provides an ‘independent’ reassurance to the board through its oversight and monitoring role. Among many responsibilities the boards entrust the Audit Committee with are the transparency and accuracy of financial reporting and disclosures, effectiveness of external and internal audit functions, robustness of the systems of internal audit and internal controls, effectiveness of anti-fraud, ethics and compliance systems, review of the functioning of the whistleblower mechanism. Audit Committee may also play a significant role in the oversight of the company’s risk management policies and programs.

Audit Committee has thus become one of the main pillars of the corporate governance system in Indian public companies. In steering companies through today’s complex business environment, boards are going to need strong leadership from their audit committees. Expanding the field of vision, clearly defining who’s tracking the company’s risk radar, and taking a step back to re-evaluate its own performance are some of the important steps every Audit Committee should consider. 

This section of the site includes a range of useful publications relating to the audit committee’s operations and oversight responsibilities.

Audit Committee Effectiveness

Effective use of audit committees for corporate governance

The document describes roles, powers, independence and competency of the audit committee as important factors that influence the effectiveness of the committee. It also emphasizes on the board of director’s role in effectively leveraging audit committee in the discharge of its oversight responsibility.

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Posted with permission from the Institute of Chartered Accountants of India, copyright 2009.

Effective functioning of the audit committee at this time of global crisis

In the present global financial crisis, upgrading the corporate governance to regain the confidence of the stakeholders
is utmost important. Audit committees could play a very vital role in improving the stakeholder’s confidence and corporate governance by bringing out better internal control systems, better monitoring and oversight, and better disclosures and quality of internal and external reporting.

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Posted with permission from the Institute of Company Secretaries of India, copyright 2009.

Role of the audit committee in ensuring good corporate governance in banks

The global financial crisis and recent incidents of corporate frauds have brought into sharp focus the importance of the critical role to be played by the audit committees in ensuring good corporate governance particularly due to vulnerability of the economy to any turmoil in the financial system. This article traces the evolution of the concept of audit committee in the Indian banking system.

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Posted with permission from the Institute of Chartered Accountants of India, Copyright 2009.

Assessing audit committee effectiveness

The audit committee is seen as a key fulcrum of any company. The responsibility for assessing effectiveness of the audit committee is thus assuming more and more importance. This document discusses some of the key factors in this regard.

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Audit committee best practices

The document provides an illustrative list of some of the best practices in regard to communication practices and procedures for the audit committee and the external auditor.

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Dig Deeper

Related Party Transactions and Minority Shareholder Rights new

The report, based on the OECD Principles of Corporate Governance, focuses on the corporate governance framework that manages related party transactions with the aim to protect minority investors.  It covers over 30 jurisdictions, including in-depth reviews of Belgium, France, Israel, Italy and India.

OECD (2012), Related Party Transactions and Minority Shareholder Rights, OECD Publishing

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Completing the Puzzle: Financial, Sustainability and Governance Reporting

This publication from the International Corporate Governance Network (ICGN) Yearbook 2011 discusses the role that the auditor should play in bringing together financial, sustainability, and governance reporting.
Posted with permission from the International Corporate Governance Network (ICGN), copyright 2011.
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Whistleblower services: Overview and example

The document discusses communication tips for audit committee and the management to ensure that employees, investors and others are aware of the whistleblower policy and process for submission of anonymous complaints including any third party services sought.

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Vigilance rating mechanism

India ranks 83 in the Corruption Perception Index (2007) and there is a need to be extra vigilant to com bat this menace. As such, similar to the Risk Rating/Credit Rating and Corporate Governance Rating systems, we need to have Vigilance Rating Mechanism as well. This article explores the concept of vigilance rating.
 

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Posted with permission from the Institute of Chartered Accountants of India, Copyright 2009.

Whistleblower provisions: Questions to ask

In India, whistleblower mechanism is still a non- mandatory requirement. However, Clause 49 of Listing Agreement with stock exchanges entrusts the audit committee to review the functioning of the mechanism where it exists. The document provides questions that the audit committee may wish to raise in reviewing and approving whistleblower process.

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Employee complaint procedures: A sample draft

Employee complaint procedures are designed to ensure fullest observation of the company’s business principles and procedures. In addition they also satisfy non-mandatory provisions for companies to institute a whistleblower mechanism. This document is a sample draft of a whistleblower policy.

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Comprehensive compliance management

By practice many corporate entities in India equate corporate compliance to legal compliance. Audit committee can play a significant role in legal compliance audits. While this exercise could be complicated and vast in scope, it would help in reporting red-alert areas to the Board/Committee on a periodic basis.
 

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Posted with permission from the Institute of Company Secretaries of India, copyright 2009.

Role of professionals in promoting ethical business practices and clean governance

The essence of corporate governance is to ensure that there is transparency in the system of decision making. This transparency is required to fix accountability.  The article explores the importance of basic principles of transparency, accountability and protecting the interests of all shareholders and stakeholders in conducting an ethical business.

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Posted with permission from the Bombay Chartered Accountant Society, Copyright 2009.

Tools

Creating audit committee charter – A benchmarking tool

The tool examines eight key elements of audit committee responsibility, and identifies practices for each that relate to minimum statutory requirements, current best practices, and current leading-edge practices.

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Audit committee meeting agenda builder

This tool is a worksheet that enlists the key responsibilities of the Audit Committee allowing members to determine the frequency of review of each of the items on the basis of criticality/regulatory requirement. Thus, determining whether or not a particular issue is to form part of a particular meeting agenda.

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Audit committee effectiveness – Self assessment

The tool is designed in the form of a checklist of Audit Committee functions which have to be rated on a graded scale of perceived effectiveness in the areas of risk management, financial reporting and compliance, internal control environment, and corporate governance.

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Specimen audit committee report

As a best practice, the Audit Committee should report its findings to the board, identifying any matters on which it considers that action or improvement is needed, and make recommendations on the steps to be taken. This tool provides a sample of the report that Audit Committees can consider for reporting to the Board.

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Sample audit committee charter

This sample audit committee charter was developed from a combination of charters, with the addition of necessary modifications resulting from the Companies Act 1956 and Clause 49 of the Listing Agreement of stock exchanges in India.

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