The NYSE listing standards require audit committees to perform an annual performance evaluation, and this responsibility must be set forth in the audit committee’s charter. The Sarbanes-Oxley Act does not require audit committees to assess their performance, but the legislation itself may be the strongest argument for a robust evaluation process.
For information and resources on board evaluations, see Board Evaluations, Education and Development.
Benefits Obtained from Performance Assessments
A well-crafted performance assessment process can provide a number of benefits to the audit committee,
- Prioritizing the audit committee agendas and meeting structure to focus on the most critical issues
- Shifting compliance oversight into the time between live meetings
- Considering the committee’s composition in the context of current and future financial reporting challenges
- Revisiting the timing, level of detail, and quality of materials provided by management
- Identifying topics for continuing education.