The Role of the Audit Committee; the Future Interaction and Communication With The External/Statutory Auditor
Should the revised rules, regulations and laws on auditor independence, objectivity and enhanced professional suspicion from the external auditor change the role major audit companies have traditionally played in guiding the audit committees?
The external auditor, on the one hand, must be entirely independent of the company it audits and the Audit Committee, on the other hand, must also be familiar with the statutory and regulatory independence requirements for auditors.
As of 2016 additional requirements (will be discussed in detail at the London independent audit committee conference http://www.copenhagencompliance.com/2016/auditcommitteeanno/) that the external auditor advising the audit committee of any services or relationships, must bear on the firm’s independence to provide the particular guidance.
Fair value, impairment continues to be an important component of financial reporting
The technical competence of the external auditor is no longer sufficient to ensure a high-quality audit. The auditor also must exercise a high level of independence, objectivity and professional judgement and distrust the reviews and documents placed by the audit committee.
The audit committee's interactions with the auditor can provide opportunities to evaluate whether the auditor continuously demonstrates integrity, objectivity and professional scepticism in the use of estimates and judgments in the financial statements and related disclosures.
The auditor must be able to evaluate the methods and assumptions by challenging where necessary, management's assumptions and application of accounting policies and procedures. An important part of evaluating the auditor’s objectivity and professional for scepticism is the audit committee checklist to measure the candour and revealing nature of the responses. A proactive audit committee can place open-ended questions to the lead audit partner to get an actual picture of the audit engagement.
Completeness and transparency of disclosures.
During the seminar we will discuss relevant topics that include:
- What are the financial reporting challenges posed by the company's business model
- Determine the quality of the financial management team
- Examine the robustness of the internal control environment
- Addressing the changes in accounting methods or key assumptions underlying critical estimates
- The checklist on the range of accounting issues to be discussed during the audit
The audit committee must clearly articulate the processes and summarise the evidence used to evaluate the significant estimates and judgments to ensure that the auditor's opinion on the financial statements, fairly presents the real financial picture according to the Generally Accepted Accounting Principles.
For details on the new auditor's independence and the new Audit Committee regime, please see previous articles http://www.copenhagencompliance.com/2016/auditcommitteeanno/thoughtleadership.htm or attend the workshop/seminar http://www.copenhagencompliance.com/2016/auditcommitteeanno/
