Audit Committee

The primary means that a state body has of reporting on its activities is its annual report and financial statements. Boards are required to establish an audit committee to advise on internal controls (including corporate governance) and audit matters.

The Committee should provide an independent and objective review of the financial reporting process, internal controls and the audit functions of an organisation. Its role is advisory rather than supervisory in nature. The actual composition and duties of an Audit Committee will reflect the size and character of the organisation. An audit committee can:

The Code of Practice for the Governance of State Bodies (2001) states that boards should establish an Audit Committee of at least three independent non-executive Directors with written terms of reference which deal clearly with its authority and duties. The Audit Committee should:

For civil service departments and agencies with appointed Accounting Officers the Report of the Working Group on the Accountability of Secretaries General and Accounting Officers (the Mullarkey Report), 2002, states there should be a formally constituted Audit committee in each Department/Office operating with a written charter, have at least two external members and prepare an annual report to the Accounting Officer.

Many Companies incorporated in Ireland under the Companies Acts will be required to establish Audit Committees when the relevant sections the Companies (Auditing & Accounting) Act 2003 become law. The Office of the Director of Corporate Enforcement has recommended July 2008 as a target date to combine with similar requirements associated with the implementation of the EU 8th Directive.

Quoted plc's they also come under Stock Exchange requirements to abide with the corporate governance guidelines of the Financial Reporting Council. The requirements of audit committees are addressed in The Combined Code on Corporate Governance (2003, 2006) and the Guidance on Audit Committees (the Smith Report). While written for quoted companies these guidelines are generally accepted as best practice in the field of corporate governance.

Composition and Duties

To comply with the Code of Practice for the Governance of State Bodies (2001) an Audit Committee should be a formal sub-committee of the Board and meet the requirements listed below. In the case of Audit Committees constituted for Departments and Offices covered by the Mullarkey Report the overall principles are similar though there is recognition of the particular circumstances of smaller organisations.

The Audit committee of a State body should

The guidance for Audit Committees set up under the Mullarkey guidelines are that they should

Monitoring of Audit

The constitution and terms of reference of the audit committee should be reviewed by the board from time to time and updated as appropriate.

The chief executive, head of finance and head of internal audit should attend meetings (though not as members of the audit committee).

Items for discussion at committee meetings may include