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Audit committee requirements - Coggle Diagram
Audit committee requirements
Audit committee is key to ensuring that an organisation has robust and effective processes relating to financial reporting, internal controls, risk management and ethics
Main oversifght body for the internal and external auditors
Listed companies are required to have audit committees as are some financial insitutions
Requirements for an audit committee
Disclosure Guidance and Transparency Rules: Listed companies are required under the DTR to establish an audit committee
UK CG Code requires the board of a listed company to establish formal and transparent policies and procedures to ensure the independence and effectiveness of internal and external audit functions and satisfy itself on the integrity of financial and narrative statement
Under the Code, the board is required to establish and audit committee with the main roles and resposnbiilties listed in the UK Code and describe in the company's annual report the work of the audit committee
The FRC guidance on Audit Committees states that the main role and responsibilities of the audit committee should be set out in written terms of reference tailored to the particular circumstances of the company and that the audit committee and board should review annually the effectiveness of the audit committee
Composition of the audit committee
DTR requires that audit committees of listed companies be comprised of
A majority of inepdendnet members, including the chair
At least one member who has competencies in accounting or auditing
Members who as a whole have the competencies relevant to the sector in which the listed company is operating in
UK CG Code
A minimum of three independent NEDs, two for companies below the FTSE 350
One member should have recent and relevant financial experience
Members who as whole have the competencies relevant to the sector in which the listed company operates
The chair of the board should not be a memebr
FRC guidance provides that appointments to the audit committee should be made by the board on the recommendation of the nomination committee in consultation with the audit committee chair