Audit Committee

In recent years the audit committee has become one of the main pillars of the corporate governance system in British public companies. The audit committee is created with the aim of enhancing confidence in the integrity of an organisation's processes and procedures relating to internal control and corporate reporting. Boards rely on audit committees to, among other things, review financial reporting and to appoint and provide oversight of the work of the external auditor. Audit committees can also play a key role in providing oversight of risk management. This section of our site provides you with our audit committee handbook and access to other relevant materials such as our audit committee performance evaluation checklist and links to source guidance for audit committees from the Financial Reporting Council.

Financial and other reporting

The audit committee is required to monitor the integrity of the financial statements of the company, and any formal announcements relating to the company's financial performance, reviewing significant financial reporting judgements contained in them.

• Down the TRack: Surveying preliminary announcements
• Challenges for audit committees arising from current market conditions
• Swimming in words: Surveying narrative reporting in annual reports
• Finishing [in] figures: Surveying financial statements in annual reports
• Measuring halves: Surveying half-yearly financial reporting
• In Many Styles: The second year's interim management statements
• FSA judgement on Woolworths

• Inside out: The importance of identifying and disclosing price-sensitive information

Risk assessment and internal control

The audit committee is required to review the company's internal financial controls and, unless expressly addressed by a separate board risk committee composed of independent directors, or by the board itself, to review the company's internal control and risk management systems.

• The Revised Guidance for directors on internal control

Going concern

The audit committee should pay particular attention to management's use of the going concern assumption in the financial statements.   The FRC has issued updated guidance for directors of UK companies on going concern and liquidity risk.

Going concern and financial reporting: Guidance for directors of UK companies

External audit

The audit committee is required to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements.

• ICAS guide to the assessment and appointment of auditors
• ICAEW guidance for audit committees
• Audit Quality Framework: Financial Reporting Council
• FRC publishes feedback on the Audit Quality Framework

• APB Ethical standards for auditors

Internal audit

The audit committee is required to monitor and review the effectiveness of the company's internal audit function.

• ICAEW guidance for audit committees: The internal audit function

Whistleblowing

The audit committee should review arrangements by which staff of the company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.

• ICAEW guidance for audit committees: Whistleblowing arrangements

Catch the 2009 current

A comprehensive guide to the role and responsibilities of the audit committee.  It includes an illustrative terms of reference for an audit committee, a specimen audit committee report and questions for audit committee members to ask management to provide an appropriate level of challenge.

• Catch the 2009 current - The Audit Committee Knowledge

Illustrative audit committee report

Our illustrative report provides an indication of good practice in reporting by audit committees.

• Illustrative audit committee report

Audit committee performance evaluation self-assessment checklist

The checklist differentiates between the requirements set out in the UK Corporate Governance Code and the FRC Guidance on audit committees and is applicable for periods commencing on or after 29 June 2010.  While the Guidance on audit committees is not mandatory it is recognised as a best practice benchmark for audit committees and so it is worthwhile assessing performance against this as well as against the main body of the Code.Completion of this checklist will help audit committees assess their own performance and identify areas for further attention.

• Audit committee performance evaluation - The self-assessment checklist (PDF)

The Combined Code on Corporate Governance

The Combined Code on Corporate Governance sets out standards of good practice in relation to issues such as board composition and development, remuneration, accountability and audit and relations with shareholders.

• The Combined Code and associated guidance

The Guidance on Audit Committees

The FRC Guidance on Audit Committees (formerly known as the Smith Guidance) was first published in 2003 and updated in 2005. It is intended to assist company boards when implementing the sections of the Combined Code on Corporate Governance dealing with audit committees and to assist directors serving on audit committees in carrying out their role.

• FRC Guidance on Audit Committees