The annual audit is a complex process that must be done correctly in order to comply with important regulations and laws. This process requires a secure process for communications, collaboration and secure document storage. A surefire way for boards and audit committees to ensure that their audit committee activities are secure and confidential is by using Diligent board portal software and Diligent Messenger for secure communications.
Diligent's portal stores audits and disclosures indefinitely for future review and comparison. The board administrator can grant granular permissions to allow auditors, financial experts and audit committee members to access the various areas of the portal they need to fulfill their respective duties and responsibilities. Here's a look at an audit committee reporting checklist:
Audit Committee Reporting Checklist
By breaking the steps of the audit reporting process down into sections, it makes easier work of this time-consuming, complex task. Substance Shareholders and regulatory bodies want assurance that the audit committee has performed due diligence in their disclosures, so it's important to review the audit report for standard boilerplate language and eliminate it. Assurance reporting should be understandable, informative and engaging. It should provide readers with specific information about what the audit committee did. Of greatest importance is to affirm that the report highlights audit issues and how the company manages them. Audit Committee Charter Audit committee reporting should disclose and explain any changes to the audit committee charter and make reference to the annual review of the audit committee chair. The committee also needs to affirm that they've met all of their responsibilities under the charter. Review the audit committee charter to be sure that it permits the committee to obtain external independent advice. The report should include details on whether the committee opted to secure third-party independent advice. Audit Committee Membership On an annual basis, the board must review the audit committee's composition and affirm that the committee has the appropriate expertise and resources that it requires to fulfill its responsibilities, including responsibilities pertaining to risks and controls. The board must also be prepared to disclose and explain any changes to the audit committee. In addition, the board must provide specific assurance that details that the audit committee has financial experience that's recent and relevant. The board must also confirm that the audit committee has the necessary commercial, financial and audit expertise to deal effectively with the issues it faces. Information Flow to the Audit Committee It's in the board's best interest to get confirmation from the audit committee that the information they've received from management and the external auditors is timely, reliable and sufficient to ensure that they have all the information they need to fulfill their duties and responsibilities. Risks and Internal Controls The board of directors should confirm that they - or a relevant committee - disclosed what steps they took to satisfy themselves that the company's risk and control framework and processes are operating properly. It's recommended for boards to disclose and provide a summary of the process they use to review the operations of the system of internal controls. It's also crucial for the board to confirm that the company took the necessary actions to remedy any significant weaknesses or failings they've identified in reviewing their system of controls. Valuation of Assets and Liabilities The audit committee should be able to provide assurance that they have scrutinized and challenged the significant assumptions they used for determining values. The audit committee should be able to confirm that it is satisfied that the market and models to which the valuations are marked have robust liquidity and transaction profiles. The committee should also be able to confirm that they can disclose critical judgments and key estimates in a meaningful way. The disclosures should include an unbiased explanation of the factors that account for any significant deviation from those reported in previous years. Finally, the audit committee should be able to affirm that the auditors brought an appropriate degree of skepticism in performing the audit. Write-down and Impairment Provisions With regard to material write-down and impairment provisions, the audit committee should provide a summary of the factors they took into account and any considerations they made to fulfill their responsibility in endorsing these provisions. The audit committee should be able to affirm that they believe that the auditors fulfilled their verification responsibilities with due diligence and professional skepticism. Securitization, Off-Balance-Sheet and Contingent Liabilities Audit committees should be able to provide a description of the work they accomplished to:- Be satisfied that they identified all securitization arrangements, off-balance-sheet liabilities and contingent liabilities and disclosed them in detail in the financial statements;
- Critically assess and challenge, if necessary, the valuations pertaining to the liabilities; and
- Describe the methodologies they used to determine the values.
- A description of its interaction with the compensation or remuneration committee;
- Assurance that the compensation policies and practices for top executive, key business unit leaders and senior finance, control and risk management personnel are the appropriate ones to maintain a robust control environment that's consistent with good stewardship. If this has been done, the audit committee should refer to it in its report.
Media Highlights
Environmental, social and governance (ESG) issues have become more complex and multifaceted than ever before. At the same time, ESG continues to ascend on board and leadership agendas.
In this buyer’s guide, we explore what a market-leading ESG solution should look like and highlight the key areas organisations should be prioritising as they embark on their search.