The role of the audit committee

Amid recent media coverage and an ongoing productivity commission we are all acutely aware of the roles and responsibilities of the remuneration committee of a publicly listed company. However, another important board committee largely misunderstood is the audit committee.

The audit committee, or risk and audit committee in some organisations, is mostly made up of non-executive board members. The audit committee is charged with the appointment, engagements, management and measurement of the annual external audit and subsequent recommendation to the board regarding the sign-off of the financial report.

The evolution of the audit
In the past audit committees may have only met once of twice a year, however now it is common for audit committees to sit four to five times a year. Governance has also played a role in the evolution with more boards recognising that the responsibility for a company's financial reporting rests with them, hence the role of the audit committee has changed and essentially provides an effective mechanism for focusing on issues relevant to such reporting.

AFR roundtable
The evolution of the audit committee was one of the main themes to come out of anAustralian Financial Review (AFR) roundtable discussion which the Institute hosted at our offices today. Participants at the roundtable included chairs of audit committees, an auditor from the Big 4 and myself. The purpose in hosting the roundtable was to clear some of the confusion about the role, drivers and benefit of the external audit which currently exists within the business and investor communities.

The key themes of today's discussion included:
- Evolution of the audit committee
- Role and responsibilities of the audit committee
- The relationship and functionality of external auditors and the audit committee
- The risks for the industry and what the future holds.

The roundtable experience was beneficial as I was able to learn from the participant the key issues, and future challenges that the audit committee will face along the road to continued evolution.

After the roundtable tt was pleasing to come to the conclusion that Australia's auditing profession, along with the current framework of auditing standards, is among the world's best. However, looking towards the future we should be continually challenging ourselves to identify and develop actions that aim to improve auditing practices and outcomes.

A guide to audit quality
To date there has been very little guidance, to which I am aware of, to help businesses understand the quality of the audit service being provided to them. In this regard, the Institute has produced a guidance document aimed at educating the marketplace on the specific drivers of audit quality. We have recently witnessed that the role of audit can be understated and undervalued. This guide will help ensure Australia remains focused on the benefit of audit. The guide will be available free of charge from the Institute of Chartered Accountants website (www.charteredaccountants.com.au) in the coming weeks so stay tuned.