Under What Circumstances is it Advisable for the Audit Committee to Engage Independent Counsel and Consultants?

Audit committees should have the authority to engage independent counsel and other consultants as they deem necessary to carry out their duties. While one cannot predict all of the scenarios in which the audit committee may need to engage third parties, it is highly advisable to develop these third-party relationships early on and, if possible, before their services may be needed to conduct an internal investigation or in conjunction with significant business transactions or other matters. This becomes particularly important when confronted with instances of suspected or known fraud for which independent investigations may need to be assembled expeditiously.

In cases of suspected or discovered illegal or fraudulent activities, the audit committee may also consider the need to engage forensic accountants to provide a variety of skills with respect to proficiencies in accounting, investigative skills, computer technology and data analysis, interviewing and litigation support. Legal counsel as well as public relations specialists are additional examples of third-party service providers often consulted in contemplation of business transactions or in times of crisis. Whenever use of third-party services is being considered, the audit committee should bear in mind the following best practices prior to engagement:

  • Evaluate skills, competence and experience of service provider
  • Evaluate independence/objectivity of service provider
  • Establish specific roles/responsibilities of management, audit committee and service provider with respect to issue being addressed
  • Document agreement between audit committee and service provider regarding execution of services to be provided, timing of services and fees to be paid

It is important to note that regardless of any outside assistance that the audit committee may engage, the audit committee has ultimate responsibility. It should be proactive by taking the lead in investigations into alleged fraudulent activity and illegal acts to ensure that the evaluation of such matters is escalated and receives immediate attention, is properly communicated to all parties involved and that investigations are executed properly and in a timely manner. For further guidance on this, please refer to BDO’s practice aid on Effective Mechanisms for Reporting, Investigating and Remediating Fraud within the Appendix.


The organization must provide appropriate funding for the audit committee to compensate the outside auditors and any independent counsel and advisors it engages and to fund ordinary administrative expenses of the audit committee that are necessary in carrying out its duties.

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