Quite simply, the audit committee’s mission is oversight. More specifically, this oversight should be focused on the following areas: financial reporting, risk management, audit function.
The audit committee should be directly responsible for the appointment, compensation, retention and oversight of the work of auditors who provide audit services to the organization (whether the services are provided by the principal auditor or another firm).
An awareness of the independence rules is essential to maintaining audit committee independence.
Generally audit services provided must be performed by CPAs who are deemed independent. Generally, CPAs are not independent if they are in a position to influence, make management decisions, provide accounting services or have financial interests in a nonprofit organization.
“Accounting rules are not always precise. Quite often there is great latitude in the judgments that produce financial statements. We believe in open, regular discussions with the audit committee, presenting opportunities for direct questions about how different issues are handled by the org...
The audit committee must have an unwavering mandate for financial statements that transparently and meaningfully portray the organization’s circumstances.
We will continue to stress the importance of understanding an organization’s tone at the top because it provides the basis for ethical behavior within an organization.
The global financial crisis and economic turbulence continues to expose organizations that have poor risk assessment and management practices and should serve as a warning to all organizations.
Currently, there is debate over the division of responsibilities between the board of directors and other committees of the board (e.g., audit, compensation, finance and nominating committees), specifically with respect to risk oversight.
No discussion of risk would be complete without a direct consideration of the risk of fraud and the responsibilities for dealing with fraud.
In February 2010, COSO issued Fraudulent Financial Reporting: 1998-2007, a report which provided a comprehensive analysis of fraudulent financial reporting investigated by the SEC between January 1998 and December 2007.
As indicated previously, the audit committee’s oversight responsibility for the audit function covers work performed by both external and internal auditors.
Internal control over financial reporting is crucial to the governance of an organization. The audit committee’s primary responsibility with respect to internal control is the internal control over financial reporting.
If SDs or MWs are identified, the audit committee should ask the following...
The International Accounting Standards Board (IASB) has developed International Financial Reporting Standards (IFRS) to address the variability in reporting standards between countries.
The Internal Revenue Service (IRS) Federal Form 990 (Form 990) asks in Part VI, Section B whether the organization provided a complete copy of the Form 990 to all members of its governing board before filing the form.
The audit committee must establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential anonymous submission by employees of concerns regarding questionable accounting or...
Audit committees should have the authority to engage independent counsel and other consultants as they deem necessary to carry out their duties.