Audit Committee Handbook - KPMG

1 Audit Committee Handbook Audit Committee Institute 2017 Edition An Audit Committee is essentially an oversight Committee , for it is management who are responsible for the internal controls and the financial statements. The Committee , however, has to satisfy itself, on behalf of the board and ultimately the shareholders that key controls are operating, that ethical practices are being reinforced, that key accounting estimates and judgements are being properly made and that internal and external audits are effective.. Audit Committee Institute Audit Committee Handbook Contents About the Audit Committee Institute The Audit Committee Institute (ACI).

2 Champions outstanding governance to help drive long-term corporate value and enhance investor confidence. Through an array of programs and perspectives in over 40 countries worldwide, ACI engages with directors and business leaders to help articulate their challenges and promote continuous improvement. Drawing on insights from KPMG. professionals and governance experts worldwide, ACI seeks to provide actionable thought leadership . on risk and strategy, talent and technology, globalization and compliance, financial reporting and Audit quality, and more all through a board lens. Introduction 4 8 Example questions around 204.

3 Chapters identifying and assessing risk 1 Guiding principles for Audit 6 9 Example risk summary and 206. committees register 2 The regulatory landscape - Ireland, 10 Internal control and risk 210. and Global 10 management disclosures 3 Building and sustaining an Audit 28 11 Example whistle-blowing policy 218. Committee 12 Internal Audit sourcing options 222. 4 Monitoring the corporate 68 13 Specimen internal Audit plan 224. reporting process 14 Internal Audit activities key 230. 5 Risk management and internal 86 steps in the annual Audit cycle control systems 15 Specimen internal Audit report 232. 6 Fraud and misconduct 108 16 Evaluation of the internal Audit 236.

4 7 Internal Audit 116 function 8 External Audit 128 17 How to conduct an Audit tender 247. 9 Communication with 152 18 Evaluation of the external auditor 271. shareholders 19 Example policy on employment 280. of former employees of the Appendices external auditor 1 The global regulatory landscape 158 20 Example policy on the provision 281. of non- Audit services by the 2 Example Audit Committee terms 164 external auditor of reference 21 Specimen Audit management 286. 3 Potential Audit Committee topics 184 letter 4 Audit Committee meeting planner 186 22 Specimen Audit Committee 288. 5 Private session with the auditor 192 statement 6 Audit Committee self assessment 194 23 Audit Committee disclosure 298.

5 Checklist 7 Specimen year-end timetable 203. 4 Audit Committee Handbook Introduction This Audit Committee Handbook draws on insights and learnings from ACI's interaction with thousands of Audit Committee members, Audit and governance professionals, and business leaders in over 40 countries worldwide over more than 10 years. Audit committees have, in many ways, run the gauntlet through corporate accounting scandals at the start of the millennium and the expanding responsibilities, the dot-com bubble of the late 90s, the 2007 2008 financial crisis and the subsequent reforms throughout the world, corruption investigations in global companies, and the dramatic escalation and impact of cybersecurity attacks.

6 The insights gained and lessons learned have clearly set a high bar for Audit committees (and boards), and the accelerating speed and complexity of doing business will, no doubt, keep pushing that bar higher. Technology and innovation, globalisation and geopolitical turbulence and other disruptive forces are shaping a risk and regulatory landscape that few could have envisioned 15, 10, or even five years ago. By and large, we see Audit committees adapting to these changes and challenges refining their agendas and oversight processes and, in some cases, reassessing their skills and composition. Keeping pace will require agendas that are, focusing on what is most important, allocating time for robust discussion and, perhaps most importantly, understanding the tone, culture, and rhythm of the organisation.

7 Audit Committee Institute 5. Foreword The Audit Committee Handbook is intended to be a practical, user-friendly reference for both new and seasoned Audit Committee members, and for management and Audit teams that work with the Audit Committee . To that end, the Audit Committee Handbook covers the fundamentals , basic requirements and responsibilities and key areas of oversight and offers insights into the current challenges and leading practices shaping Audit Committee effectiveness today. It is written to serve as a resource for both listed and unlisted companies in the private and public sectors. While written to be relevant globally, there are specific sections tailored for the Irish landscape.

8 Of course, no one size fits all; the practices discussed in this Audit Committee Handbook should be considered in the context of each country's and Audit Committee 's needs and circumstances. Nevertheless, certain guiding principles underlie the effectiveness of every Audit Committee and the right principles can help to ensure that company specific practices are applied effectively. Some of the issues covered in the Audit Committee Handbook , cybersecurity and the impact of emerging technologies, economic volatility and big data are clearly matters that require the full board's attention. These and other broader issues are included, however, as the Audit Committee has an important role to play (at least as a catalyst) in helping to ensure that key issues particularly those related to risk and compliance are being addressed appropriately.

9 The appendices at the back of the book are intended to provide practical support to Audit committees . Soft copies of each of the appendices are available on our website at We hope this publication provides practical guidance to help Audit committees identify and achieve their objectives and add value to the board, the organisation and its stakeholders. David Meagher Chairman Audit Committee Institute Ireland Partner Audit KPMG in Ireland September 2017. 6 Audit Committee Handbook Chapter 1. Guiding principles for Audit committees The Audit Committee 's core' duties overseeing financial reporting and controls, as well as external and internal auditors are a substantial undertaking and time commitment.

10 In addition, many Audit committees have oversight responsibilities for a range of other risks that have become increasingly complex and challenging in the current business environment from operational and compliance risks posed by globalisation and the extended organisation (partners, suppliers, vendors, etc.) to cybersecurity and other risks related to emerging technologies. Prioritising this heavy Audit Committee workload continues to be a challenge for most Audit committees . Audit Committee Handbook 7. Audit committees are meeting this oversight challenge by focusing on ways to improve their effectiveness and efficiency refining their agendas and oversight processes and reassessing their skills and composition.