205059 Audit Co Assess web

Audit Committee InstituteAssessment of audit committeesAs part of the UK response to the issues raised by recent major corporate failuresin the US, the Financial Reporting Council (FRC) was asked to set up a small groupto develop the exisiting guidance for audit committees contained in the CombinedCode. In January, that group, chaired by Sir Robert Smith, produced a report andguidance to assist boards in making suitable arrangements for their auditcommittees, and to assist directors serving on audit committees in carrying outtheir duties.The report recommends that, in addition to reviewing its terms of reference, the audit committee shouldreview its own effectiveness annually. A suggested framework for such a review - an audit committee self assessment - is set out overleaf.The self-assessment has been prepared on the basis that each audit committee member will complete itindependently. The audit committee chairman would then lead discussion on the results of the questionnaire,focusing on those areas which clearly need improvement or where there is great variation in answers.Alternatively, the self assessment could be undertaken as a facilitated group activity led by the auditcommittee chairman or an external party. Audit committee chairmen may wish to give more weight to someaspects of the self-assessment than others. Appropriate weighting will be influenced by a number of factorsincluding, but not limited to: the committee’s terms of reference; ...