Governance, Risk and Compliance
Audit – The role of the Board
The UK Corporate Governance Code, also known as the Code, and the Quoted Companies Alliance (QCA) code, place considerable responsibility on the Board, the board committees and Non-Executive Directors in relation to the audit process.
Understanding those requirements and the principles that underpin them is not easy or straightforward. While the Code may not apply to a company, it will inform best practice. Our expertise lies in helping your company navigate through this complex, and sometimes opaque, environment to find a solution that is appropriate and adds value.
Please contact us to discuss how we can help your Board ensure it complies with current requirements and adds real value to the Audit process.
The Non-Executive Directors and board committees of public companies have additional responsibilities. These include reporting on issues such as going concern, remuneration, financial reporting and the audit relationship.
We have produced a review of what the Code and QCA code say about audit for listed companies and a brief commentary on their more general application, including outside the public markets.
Corporate Governance: A practical guide for Audit Committees of mid-market companies
We have also provided guidance on the requirement for forms of Narrative Reporting.
More information on the Strategic Report and the Directors Report.
Audit Committee Obligations
The role of the Audit Committee is one of oversight of the integrity of a company's financial affairs in both the interests of shareholders and on behalf of the Board. This includes everything from the effectiveness of a company's internal control environment to the fair presentation of information in the financial statements. The Audit Committee may also cover whistleblowing policies and procedures.
The Audit Committee is specifically responsible for oversight of the financial reporting process, selection of the independent auditor, and the receipt of audit results both internal and external. For listed companies, there is a requirement for an Audit Committee to report to shareholders in the annual report. For unlisted companies, an Audit Committee can ensure best practice is adhered to.
Audit Committee Structure
A rule of thumb is that the size of the Audit Committee should be appropriate for the complexity of the business and the risks it faces. In practice, for a FTSE350 company, the committee should be made up of at least three independent Non-Executive Directors (NEDs). For smaller listed companies, the requirement reduces to two. The company Chairman is allowed to be a member provided the independence criteria are met. The Chair of the Audit Committee plays a key role in ensuring that members are allowed to perform their oversight role freely and effectively.
Please contact us to discuss how we can support and advise your board and Audit Committee.