How have the roles and responsibilities of audit committees (“ACs”) changed in the wake of new regulation that has recently become effective? We’ve put together a 6-part series about updates and challenges stemming from the law of 23 July 2016 on the audit profession and Regulation (EU) N° 537/2014.
Step 2 – What are the roles and responsibilities of the AC?
In this article, we focus on step 2.
What are the roles and responsibilities of the AC?
ACs are required to manage different aspects of the entities, as well as their relationship with the statutory auditor. This includes:
- informing the entity’s management about the outcome of the audit and explaining the AC’s role in the audit process
- monitoring the financial reporting process of the entity and submitting recommendations or proposals to ensure its integrity
- monitoring the effectiveness of the internal quality control and risk management systems of the entity and, where applicable, its internal audit, regarding the financial reporting of the entity
- monitoring the audit performance
- monitoring the auditor’s independence
- being responsible for the procedure for selecting the statutory auditor
Most of the requirements for ACs set out in the new legislation are already being performed today and represent the ‘best practice’. However, requirements for ACs are now being enshrined in law meaning that companies that have previously applied some but not all areas will now need to take steps to comply.
The Commission de Surveillance du Secteur Financier (CSSF) is competent in its assessment of the performance of ACs. The new legislation does not set the scope of this assessment of the AC, but reference may be made to the duties of the AC as set out above.
KPMG supports strong, independent ACs and believes that ACs should be actively involved in assessing audit quality and auditor independence, including approving any non-audit services to be provided by the statutory auditor.
Questions? Don’t hesitate to get in touch with me or to visit our website.
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