5.11 Role of Audit Committee in the audit process

The Audit Committee plays a crucial role in the audit process, providing oversight and ensuring the integrity and effectiveness of the organization’s financial reporting and auditing activities. The primary responsibilities of the Audit Committee include:

1. Independence and Objectivity:
   • The Audit Committee should consist of independent directors who are not involved in the day-to-day operations of the organization. This ensures their objectivity and independence in overseeing the audit process.
2. Selection and Oversight of External Auditor:
   • The Audit Committee is responsible for selecting and appointing the external auditor. They evaluate the auditor’s qualifications, independence, and performance. They also approve the audit engagement terms, fees, and scope of work. The committee ensures that the external auditor is competent, experienced, and capable of providing an unbiased and thorough audit.
3. Review of Financial Statements and Disclosures:
   • The Audit Committee reviews and approves the organization’s financial statements, including the annual report and interim financial statements. They assess the appropriateness of accounting policies, significant judgments, estimates, and disclosures. The committee ensures that the financial statements comply with applicable accounting standards and regulatory requirements.
4. Internal Control and Risk Management:
   • The Audit Committee oversees the organization’s internal control systems and risk management processes. They review and evaluate the effectiveness of internal controls, including financial, operational, and compliance controls. The committee assesses the adequacy of risk management processes, identifies key risks, and ensures appropriate mitigation measures are in place.
5. Communication with External Auditor:
   • The Audit Committee maintains regular communication with the external auditor throughout the audit process. They discuss audit planning, significant audit findings, and any concerns or issues raised by the auditor. The committee seeks clarification on accounting treatments, audit procedures, and any potential impact on financial statements.
6. Audit Quality and Independence:
   • The Audit Committee monitors the quality and independence of the audit process. They evaluate the auditor’s performance, including their adherence to professional standards, ethical guidelines, and independence requirements. The committee ensures that the audit is conducted objectively, thoroughly, and in accordance with applicable auditing standards.
7. Whistleblower Mechanism and Fraud Detection:
   • The Audit Committee oversees the organization’s whistleblower mechanism and ensures that adequate procedures are in place to report and investigate any potential fraud, irregularities, or misconduct. They review the effectiveness of the organization’s fraud detection and prevention programs.
8. Compliance and Legal Matters:
   • The Audit Committee monitors the organization’s compliance with laws, regulations, and ethical standards. They review any legal or regulatory issues related to financial reporting, audit, or internal controls. The committee may engage legal counsel or other experts as necessary to address complex legal matters.