There is no universal standard for the way in which audit committees work.
Although broadly they covered the same activities, the number of formal meetings
of companies reviewed ranged between 3 and 13 in the year. The time taken per
meeting also differed considerably. Although all audit committee members must be
independent non-executives, practice differs considerably as to whether the
company chairman and/or the CEO regularly attend audit committee meetings. The
documentation supporting audit committee work needs to be managed carefully to
ensure that the committee members are well-informed, but are not so overloaded
with information that key points are missed. Dealing with regulatory matters
takes a great deal of audit committee time. It can be useful to schedule a
‘white space' meeting to discuss broader risk issues. Having multiple
directorships, and being able to compare practices in different companies, is an
advantage to audit committee members both in evaluating the performance of their
committees and in providing strategic advice. Audit committee evaluation takes
place in a variety of formal and informal ways, including interviews and
questionnaires, administered internally and by external professionals. It is
very important to non-executives that they feel that they can trust the
company's executives. The corollary to this is that in situations where the
executives are considered less trustworthy, governance might be difficult as
well-qualified potential non-executives might be reluctant to join the board.
There appears to be an expectations gap between how the audit committees see
their regulatory role and how this is perceived by the media. For example, some
parts of the media appear to see the audit committee role as the prevention and
detection of fraud. This view sits uncomfortably with the views of audit
committee members - in line with regulation - that theirs is an oversight
function. Although audit committee practices differ widely, they appear to
evolve to suit the companies' and individuals' particular contexts. Accordingly,
legislation to standardise practice might not be useful, indeed, it may be
counter productive. Given the potential changes to UK regulation that could
arise from implementing the EU 8th Directive, it is important that this point be
made explicitly to legislato
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