Governance, Risk & 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.
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.
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.
Our teams are well versed in the operation of regulations, and perhaps more importantly in the thinking behind them, and can help you navigate your way through complexity to produce solutions that have value and suit the needs of your own organisation.