Why is audit committee important

Growing organizations, as well as established organizations, benefit from the experience, oversight and direction that an audit committee may provide. Know What You're Looking For? Nonprofit Issues.

Content Type. Order A Copy. Audit committees meet with the CEO and financial officers to review and maintain effectiveness of organizational controls and external financial reporting. They often work in partnership with the finance committee, which is typically focused on internal reports, operational issues and financial strategy.

The audit committee should play a similarly proactive role in the review and update of both of these programs. An organizational structure that has the internal audit team reporting directly to the audit committee contributes to the overall integrity of the internal audit function.

An audit committee communicates a message of independence, reliability and trust. We also find that, generally, common sense works. Common sense is the action of need, not compliance. Audit committees are a way to help focus on common sense and give governance test and challenge to the organisation.

If an entity chooses to have an audit committee, it needs to be fit for purpose. Audit committees created solely for compliance reasons are unlikely to be effective and add value to the entity. If you wish to contribute good ideas and resources to this site, join us on our Public Sector Audit Committees group on LinkedIn or by email.

Navigation Toggle navigation. About us Media centre Publications Good practice. As can be seen from the list above, the audit committee concerns itself with much more than just financial control and the external audit process.

Whilst financial controls are important, the statistics show that the greatest sources of loss arise from the mismanagement of strategic risks. Assurance can never be absolute - effective assurance seeks to conclude whether the audit evidence obtained is sufficient to reasonably conclude on the efficiency and effectiveness of an organisation's risk, governance and internal control processes.

It is important to manage the expectation gap, which sometimes exists due to a lack of understanding of the role of audit, making it clear and emphasising the actual role, function, and limitations of internal audit.