Audit Quality: Practice aid for audit committees

Audit Quality: Practice aid for audit committees

• 14 November 2024
• Auditing and Assurance
• South African Accounting Academy

Summary:

The Financial Reporting Council (FRC) has drawn attention to their previously published Practice aid for audit committees, to assist in assessing the effectiveness of the external audit.

Article:

The audit committee has wide ranging roles and bears significant responsibility in supporting the Board, including overseeing the company’s relations with the external auditor and reviewing the effectiveness of the external audit process.

Audit committees serve the interests of investors and other stakeholders through their independent oversight of the annual corporate reporting process, including the audit of the company’s financial statements. The audit committee is responsible for the appointment of the external auditor, approval of their remuneration and any non-audit service work commissioned. The audit committee is also tasked with challenging the auditor over the quality of their work and ensuring that the auditor’s independence is not compromised. It reports on the work done, and the conclusions drawn, in the annual report. The audit committee, through its interactions with the auditor and with the other directors and management, can play a key role in facilitating a high-quality audit.

The practice aid was originally issued in 2015, and updated in December 2019.

The quality of reporting by audit committees on certain matters can make an important contribution in building investor confidence in the quality of the external audit and ultimately in the credibility of the financial statements.

Contents:

1. Introduction
2. Providing for a quality audit – Audit tenders
3. Overview of an assessment
4. Transparency – Audit committee reporting

Appendices:

1. Key areas of audit judgment
2. Examples of matters for the audit committee to consider in relation to key areas of audit judgment
3. Illustrative audit committee considerations in evaluating the auditor’s competencies
4. Other FRC publications

Click here to download the 36-page Guidance document:

https://media.frc.org.uk/documents/Audit_Quality_Practice_Aid_for_audit_committees_December_2019.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• As a practitioner, you may need to advise your clients, who have audit committees, on their functions and what is expected of them by investors.
• The audit committee has wide ranging roles and bears significant responsibility in supporting the Board.
• Audit committees should be aware of guidance issued by regulators, such as the FRC.

Relevance to Your Clients:

• The audit committee has wide ranging roles and bears significant responsibility in supporting the Board.
• Audit committees should be aware of guidance issued by regulators, such as the FRC.

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