All Boards should establish a committee which has oversight of and monitors the organisation's internal controls, risk management and audit matters. This Audit Committee must also ensure that the organisation's financial reporting and disclosures are compliant. Below is a description and summary of of the key requirements for Audit Committees for Companies, State Bodies, Government Departments, Local Authorities and Non-Profit organisations in Ireland.
Under the Companies Act 2014, all large companies and public interest entities should set up and audit committee. The Act describes the audit committee as a committee of directors, appointed by the Board to oversee financial reporting and related matters.
- The key responsibilities of the audit committee under the act are to:
- The committee is required to monitor the financial reporting process
- The committee is required to monitor the effectiveness of the company’s systems of internal control, internal audit and risk management.
- The committee shall monitor the statutory audit of the company/group and shall also review and monitor the independence of the auditors particularly in reference to any additional services provided by the auditors outside of the audit function.
- One key aspect of the committee’s relationship with the audit function is the requirement to consider the report from the auditors on key matters arising from the audit, particularly on any material weaknesses in internal control in relation to the financial reporting process.
- The committee is also required to propose appointment of the auditor to the Board of directors.
Boards of State bodies are required to establish an Audit and Risk committee. It 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:
- promote the understanding of audit's function and status within the organisation;
- advise the board on the strategic processes for risk, internal control and governance;
- enhance the independence and perceived value of internal audit;
- provide a forum for senior management to discuss internal control, including issues raised by internal and external audits;
- assist the head of internal audit in judging priorities; and
- aid the co-ordination of internal audit, external audit and any other consultancy and inspection reviews.
The Code of Practice for the Governance of State Bodies (2016) states that boards
The Board of a State body should establish an Audit and Risk Committee of at least three independent non-executive Board members, [...] with written terms of reference which deal clearly with its authority and duties.. The Audit Committee should:
- be a formal sub-committee of the board;
- have at least three members, or in the case of smaller State bodies (less than 20 employees) two independent non-executive Board members.
- have written terms of reference;
- meet at least four times a year;
- for those public bodies employing external auditors, meet the external auditors at least once a year;
- have sufficient standing in the organisation with explicit authority to investigate any matters within its terms of reference, the resources that it needs to do so and full access to information. It should be able to obtain outside professional advice and, if necessary, invite outsiders with relevant experience to attend meetings
For civil service departments and agencies with appointed Accounting Officers, the Corporate Governance Standard for the Civil Service (2015) states that: "Each Accounting Officer should establish an Audit Committee. The Audit Committee has an independent role in the provision of assurance to the Secretary General and this includes consideration of the adequacy and effectiveness of the Department’s internal control systems, control environment and control procedures, overseeing the work of Internal Audit Unit and to provide advice and professional guidance in relation to the development of the Unit and the provision of advice and guidance in relation to the systems of risk management and internal control within the organisation."
The Code also sets out the following guidelines:
- Each Audit Committee should operate under a written charter and should include external representation with appropriate expertise.
- The Chairperson of the Audit Committee should be external to the Department/Office.
- The Audit Committee should prepare an annual report to the Accounting Officer, reviewing its operations, and should invite the Comptroller and Auditor General, or his nominee, to meet with it at least once a year;
The Local Government Reform Act 2014 provides for the establishment of audit committees by all local authoritiesand confers specific responsibilities on audit committees in relation to the auditor’s report and audited financial statement:
- to review financial and budgetary reporting practices and procedures within the local authority that
- has established it;
- to foster the development of best practice in the performance by the local authority of its internal
- audit function;
- to review any audited financial statement, auditor’s report or auditor’s special report in relation to the
- local authority and assess any actions taken within that authority by its chief executive in response to
- such a statement or report, and to report to that authority on its findings;
- to assess and promote efficiency and value for money with respect to the local authority’s performance
- of its functions; and
- to review systems that are operated by the local authority for the management of risks.
The Governance Code for Charities recommends the setting up of an Audit Committee in Type C organisations. This audit committee should consist of three or more directors. The chair of the organisation’s board can be an audit committee member but cannot chair the audit committee. At least one of this committee should have recent and relevant financial experience.
The audit committee should have written terms of reference that describe the role of the committee and its responsibilities which is published on your Website.
The audit committee should:
- Monitor and review the accuracy of the financial statements of the organisation;
- Monitor and review the announcements about the organisation’s financial performance and financial controls;
- Monitor and review the control and risk management systems;
- Monitor and review the effectiveness of the organisation’s internal audit role;
- Monitor and review the external auditor’s independence and the effectiveness of the audit process;
- Monitor and review the arrangements for staff to raise concerns in confidence about possible improprieties relating to financial reporting or other matters. This policy should be in line with the Protected Disclosures legislation.
- Approve the terms of engagement of the external auditor.