Risk Assessment, Controls and Risk Management CMA Part 1 o That the audit committee meet periodically and separately with management and with internal o That the audit committee review with the independent auditor any audit problems or difficulties, o That the audit committee set clear hiring policies for employees or former employees of the inde o That the audit committee report regularly to the full board of directors to review any issues that o And finally, that the audit committee review: (A) major issues regarding accounting principles auditors and independent auditors in order to uncover issues warranting committee attention. including any restrictions on the scope of the independent auditors activities or on access to requested information, and any significant disagreements with management and managements response. pendent auditors, taking into account the pressures that may exist for auditors consciously or subconsciously when seeking a job with the company they audit. arise with respect to the quality or integrity of the listed companys financial statements, the companys compliance with legal or regulatory requirements, the performance and independence of the companys independent auditors, or the performance of the internal audit function. and financial statement presentations, including any significant changes in the companys selection or application of accounting principles, and major issues as to the adequacy of the companys internal controls and any special audit steps adopted in light of material control deficiencies; (B) analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; (C) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the listed company; and (D) the type and presentation of information to be included in earnings press releases (paying particular attention to any use of pro forma: or adjusted non-GAAP, information), as well as review any financial information and earnings guidance provided to analysts and rating agencies. • The Blue Ribbon Committee report recommended that the audit committee monitor the companys internal control processes, and most audit committees do this. They oversee the internal audit function and monitor internal control systems for compliance with legal and regulatory requirements. Authority of the Audit Committee: • Rule lOA-3(b)(6) of the Securities Exchange Act provides that each issuer shall provide for appropriate funding, as determined by the audit committee, in its capacity as a committee of the board of directors, for payment of compensation (A) to the registered public accounting firm employed by the issuer for the purpose of rendering or issuing an audit report; and (B) to any advisers employed by the audit committee under paragraph (5). • The audit committee has the authority to investigate any matter. Legislative Initiatives on Internal Control We have already referred to the Sarbanes-Oxley Act of 2002, and we will discuss it in more detail later. Before Sarbanes-Oxley, though, the Foreign Corrupt Practices Act (FCPA) dealt with public and non-pUblic companies internal controls.
Posted on: Thu, 17 Jul 2014 14:15:36 +0000
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