Usually a company forms an audit committee charter with the purpose of assisting the Board of Directors fullfilling certain tasks related to oversight, such as the company's integrity regarding its financial statements and financial reporting processes. The audit committee also is responsible for ensuring that the internal accounting systems and financial controls are properly functioning.
The charter may also have as its aim to check the internal audit services functionality, evaluating the qualifications of the independent auditors and ensure their independence and performance. Lastly, the charter shall also ensure that the company complies with all legal as well as regulatory requirements that also include the disclosure controls and also procedures of the company.
Other aspects that the audit committee charter may deal with include evaluating the process used by management in assessing and also managing the risk issues facing the company and being able to fulfill responsibilities set out in the charter. Finally there should also is a report of the committee that is included in the annual proxy statement of the company. The charter is reviewed and also reassessed each year by the committee and if any changes are to be made then the suggestions should be forwarded to the Board of Directors for their approval.
The audit committee charter must also spell out the other responsibilities of the audit committee including: reviewing annual SEC filings, reviewing quarterly SEC filings and other communications, reviewing disclosure controls and procedures, reviewing certain matters with
the internal auditors and also independent auditors, consulting independent auditors, and preparing reports for proxy statement. In addition, the audit committee charter will also spell out how the employment of formeraudit staff is to be handled and what the procedures for whistle blowing are and review legal as well as regulatory compliances.
The chair of the audit committee may be one of the Board of Directors, though not all members need to be from the Board of Directors. One of the objectives of the charter would be testing independence which can be based on established policies formulated by the company and there should be enough independence standards so as not to constrain the working of the auditors. Independent auditors should not be members of the audit committee or Board of Directors.
The audit committee must be able to access financial expertise and in this regard the charter should be sure that the audit committee has the required financial expertise as required by the company.
The audit committee charter is readily available in the market and finding one should not pose any problem, as there are many vendors who specialize in such documents and one may obtain a completely researched and well-formed audit committee charter. There is no need for researching and creating one from scratch as buying these documents provides an avenue for obtaining comprehensively created solutions that have had experts draft them and they are suited for all manner of use.
Author Resource:-
Wade Anderson is a CPA and operates DigitalWorkTools.com. Click to view an Audit Committee Charter
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