View from the trackside
Dr Fiona Underwood writes about the role of the Audit Committee in Steering the Way to Excellence in Governance, the 2014 Housing Governance Review by Grant Thornton. Read Fiona’s comments below and see the full report.
“The role of the audit committee has been written about in detail by the good and the great – there are books and papers dedicated to the topic, so what can I tell you that is different? This is a ‘pocket-size’ reflection on the good and effective audit committees that I see operating within the housing sector today.
‘Risk awareness, management and change’ is the mantra we need to heed. This is the environment that currently exists and we have to operate within. So, does that put additional pressure on the audit committee? The role of providing assurance has always been the task of an audit committee within a benign or ever changing environment, and does not change whatever the environment.
So, how do good and effective audit committees operate in organisations that are becoming more diverse? Ten points I’ve noted in really good committees are that:
1. All members take time to really understand the business, its operating environment and its future strategy, linking risk to all aspects
2. They ensure the committee does what it is meant to do – focusing on financial reporting (where there’s no separate finance committee) and internal controls
3. The committee gains assurance on business risk and compliance, considering especially the views of regulators 4. Where there’s no separate finance committee, a good audit committee ensures the accounts ‘tell the story’ – challenging whether they are consistent with the information received throughout the year
5. The membership is diverse – not all members have to have a financial background as a wider perspective is very important
6. A good training programme is in place and there is an awareness and understanding of any impending accounting changes
7. They ensure auditor independence and that a healthy (not cosy) relationship exists between the auditor and the finance team, reviewing their performance annually
8. The audit committee does not work in isolation – knowledge and understanding is shared, especially of risk, with the board and executive
9. Time is spent measuring their own effectiveness – challenging themselves on their added value
10. Finally, they do not just tick the boxes. They debate and challenge to seek the assurance and listen to ‘the lone voice in the wilderness’ – understanding that they may be saying something important.”
Dr Fiona Underwood, Altair Partner, can be contacted on 07788 643092 and email@example.com