The audit committee relies on the management to run the daily operations of the business, and maintain quality and integrity of the accounting and reporting practices, internal controls, and financial statements. The management is also responsible for legal and regulatory compliance, the auditors’ qualifications and independence, and the performance of the company’s internal audit function and independent auditors. The audit committee is responsible for the oversight of all of the above management responsibilities. Other responsibilities of the audit committee include: a.
Overseeing the financial reporting and disclosure process. b. Monitoring choice of accounting policies and principles. c. Overseeing hiring, performance and independence of the external auditors. d. Oversight of regulatory compliance, ethics, and whistleblower hotlines. e. Monitoring the internal control process. f. Overseeing the performance of the internal audit function. g. Discussing risk management policies and practices with management. 2. The auditor’s responsibility is to communicate significant deficiencies and material weaknesses that exist regardless of management’s decisions.
... hires internal auditors. They would also review the work of both internal and external auditors. b. The audit committee certainly takes on much more responsibility with ... •Approving major changes, such as mergers •Approving corporate strategy •Overseeing accountability activities Management Broad Role: Manage the organization effectively; provide accurate and ...
These significant and material deficiencies should be communicated to the management in writing. In the case of non-public companies, the auditors are not required to report separately on internal controls by the PCAOB. Thus, the auditors’ responsibility for a non-public company is to focus on fraud within the audit. 3. An independent audit firm can be changed either due to a dismissal by the company or due to the auditors’ resignation. An auditor may be dismissed if the relationship between the client and the auditor has been strained by eaknesses uncovered by the auditors in the controls or by misstatements discovered in statements that led to restatements. Resignations often occur in the case of serious financial circumstances accompanied by a significant drop in stock price. The SEC must be notified of audit firm changes through a Form 8-K filing. The SEC views an audit firm resignation differently than a dismissal. In recent studies, it has been found that, when litigation risk increases and company’s financial health falls, there are more resignations of auditors.
Research indicates that client-initiated auditor changes occur more frequently over disagreements about issues such as internal control weaknesses and the reliability of financial reporting. 4. The recent years have brought a shift towards government regulation of the accounting / auditing profession since the scandals of Enron and WorldCom. These scandals clearly ignored ethics and professional standards that were in place, conveniently finding loopholes around the system.
With a chain of such scandals, which were both business failures and audit failures, I feel the government’s regulations with the Sarbanes Oxley Act were the right step towards helping individuals and companies understand what moral, ethical, and legal responsibilities they have towards their profession. I believe, having the SEC prosecute companies, organizations, and individuals to encourage further compliance with legal and professional standards can ensure a further reduction in frauds and failures.
How do a company or an organization controls risk ? In what way can it protect its clients and even employees? There is a good and important step in any companys risk management. Careful screening of companys staff and volunteers is what needs to be done in order to minimize the risk and protect a company or an organization. One tool which can be used in this process is a background check. The ...