Today, the audit committee is widely recognised as a senior board committee with "front line" governance responsibilities related not merely to financial reporting, but also to the oversight of continuous disclosure and corporate reporting.
It is important to consider the audit committee's role in the context of the governance process of the corporation as a whole. As a committee of the board, the audit committee must carry out its duties within the framework of the governance principles and practices established by the board of directors. Good governance promotes accountability of the key players, and ensures that management works in the best interests of the corporation and its shareholders to enhance shareholder value, while taking into account the legitimate interests of other stakeholders. The audit committee's role, and its commensurate accountability to the board, is directly related to how the board chooses to discharge its oversight function. The audit committee's effectiveness is directly linked to that of the board and, therefore, many of the issues that impact the audit committee's effectiveness are also likely to impact the effectiveness of the board.
The audit committee's responsibilities may vary from company to company but the main principle is to assist the board to fulfill its duties in relation to financial reporting, risk management, internal and external audit and responding to management needs.
Hong Kong Institute of Certified Public Accountants ("HKICPA"): A guide for effective audit committee
HKICPA has issued a guide to cover various aspects of the implementation of an effective Audit Committee and the disclosure of its work. This guide provides useful guidance to companies that have or will set up an audit committee. This guide is available at www.hkicpa.org.hk under the "Publications / Corporate Governance Guides" section.
The Institute of Internal Auditors ("IIA"): The audit committee - Purpose, process, professionalism
IIA has issued a document that clarifies what it takes for audit committee members to be responsible, knowledgeable, and effective. This document is available at www.theiia.org under the "Professional Guidance / Standards and Practices / Additional Resources / Audit Committees & Board of Directors " section.