The ICSA Audit Committee Guide, 2nd edition

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The ICSA Audit Committee Guide, 2nd edition

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In the wake of the financial crisis and calls for companies to take a more prudent approach to financial risk, there is an increased emphasis on the role of the audit committee in corporate governance.

The recent Walker Report and the new UK Code on Corporate Governance mean that they also face a new operating environment. Audit committees must now therefore seek to become more effective in discharging their significant responsibilities.

The ICSA Audit Committee Guide, 2nd edition is significantly revised throughout and fully updated to reflect the Walker Report and the UK Code on Corporate Governance. The Guide identifies the current and emerging issues which audit committees must get to grips with. Describing the audit committee practices that provide the support and structure necessary to fulfil their terms of reference, this guide will help audit committees to:

• Set up and maintain an effective audit committee structure
• Oversee internal controls
• Assess the company’s processes relating to financial reporting risks
• Oversee financial reporting
• Evaluate internal and independent audit processes
• Ensure transparency and effectiveness of controls

This second edition sees major revisions throughout, notably to the chapters on risk and internal controls, running an audit committee and financial reporting and also includes a wide range of appendices, including sample wordings and evaluation questionnaires. Editable versions of these are included on the accompanying CD so that they can be tailored to individual requirements.

Shaping the Audit Committee Agenda

1 The role of the audit committee

Code principles;
Code provisions;
Application of the UK Corporate Governance Code

2 Creating and sustaining an effective audit committee

Terms of reference;
Choosing the right members;
Independence
Financial expertise and other skills
Personal qualities and experience;
The chair;
Supporting ongoing effectiveness;
Induction;
Professional development

3 Running an effective audit committee

Setting meeting agendas;
Audit committee meetings;
Audit committee reporting;
Assessing audit committee effectiveness

4 Overseeing financial reporting and disclosures

Audit committee responsibilities;
Reviewing financial statements and related information;
Recent developments in financial reporting;
Earnings management

5 Overseeing financial risks and internal control processes

Responsibilities for risk oversight;
Identifying and assessing risk;
Setting the appropriate tone;
Overseeing financial risks and internal control processes;
Understanding the risk environment;
Identifying financial risk;
Emerging issues;
Fraud;
Special circumstances;
Internal control processes;
Whistleblowing;

6 Overseeing the Internal and External Audit Processes

Overseeing the internal auditors;
Overseeing the external auditors;
Appointment, reappointment and removal;
Safeguarding independence;
Understanding the audit cycle;
Assessing the auditor’s performance;
Disclosure
Key tasks checklist

Appendices

Timothy Copnell: Timothy Copnell is the Director in Charge of KPMG's UK Audit Committee Institute. He qualified as a chartered accountant in 1989 and joined KPMG's Department of Professional Practice in 1993 where he took responsibility for corporate governance matters. He has written a series of practical guides to corporate governance developments for KPMG and also writes regular articles for various publications