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Corporate Governance - Audit Committee - 2 Charter Matrix - AICPA

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14 pages
Audit Committee Charter Matrix INSTRUCTIONS FOR USING THIS TOOL: Preparing an Audit Committee charter is often referred to as a best practice, and is actually required for many public companies. However, the charter is often prepared and forgotten except for its annual review. This tool is designed to help audit committees make the charter a living document, and use it to manage the agenda. This tool is meant as a sample. Users of the tool should put their own charter in the first column, and use this example as a guide for defining the steps to accomplish each objective, the associated performance measure, and the scheduling. The Audit Committee charter presented here (first column) is based on one from a real company, and in some places goes beyond the requirements of the Sarbanes-Oxley Act of 2002 (the Act) and stock exchange requirements. This is by the choice of the company in question, and may be considered a good practice. The AICPA Audit Committee Toolkit 2 Audit Committee Charter Matrix For the Year Ending: ___________ When to Audit Steps to Achieve Committee Accomplish (Frequency Date Charter the Objective Deliverable Due Date) Completed 1. Each member of the Audit Test for independence, based Indicate in the Audit Affirm annually or whenever a Committee shall be a member on the regulations under the Committee minutes whenever change in status by any Audit of the board of directors, in Act and any other ...
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Audit Committee Charter Matrix
INSTRUCTIONS FOR USING THIS TOOL: Preparing an Audit Committee charter is often referred to as a best practice, and is actually required for many public companies. However, the charter is often prepared and forgotten except for its annual review. This tool is designed to help audit committees make the charter a living document, and use it to manage the agenda. This tool is meant as a sample. Users of the tool should put their own charter in the first column, and use this example as a guide for defining the steps to accomplish each objective, the associated performance measure, and the scheduling. The Audit Committee charter presented here (first column) is based on one from a real company, and in some places goes beyond the requirements of the Sarbanes-Oxley Act of 2002 (the Act) and stock exchange requirements. This is by the choice of the company in question, and may be considered a good practice.  
 
Audit Committee Charter Matrix __________ For the Year Ending: _
    When to Audit Steps to Achieve Committee Accom lish Fre uenc Charter the Objective Deliverable Due Date) 1. Each member of the Audit Test for independence, based Indicate in the Audit Affirm annually or whenever a Committee shall be a member on the regulations under the Committee minutes whenever change in status by any Audit of the board of directors, in Act and any other regulations a new member is appointed; Committee member occurs. good standing, and shall be that may be operative. acknowledge that independent in order to serve independence has been on this committee. verified. 2. At least one member of the Ascertain that at least one Indicate in Audit Committee Affirm annually, unless there is Audit Committee shall be member of the audit meeting minutes which a change in status. designated as a financial committee meets the member of the audit expert . requirements of a financial committee is designated as (See the tool “ Audit Committee tehxep eArct t.u nder the regulations of the financial expert. Financial Expert Decision Tree ” in this toolkit.) 3. Review the Committee’s Review the charter each year. Report to the board on the Review annually, unless charter annually, reassess the Assess the appropriateness of appropriateness of the Audit changes are needed during adequacy of this charter, and each point in the charter in light Committee charter and any the course of the year. recommend any proposed of the previous year’s revisions recommended changes to the board of experience. Assess the directors. Consider changes completeness of the charter in that are necessary as a result light of new best practices and of new laws or regulations. new legal or regulatory requirements.          
  
  Date Completed
 When to Audit Ste s to Achieve Committee Accom lish Fre uenc Charter the Objective Deliverable Due Date) 4. The Audit Committee shall In-person meetings should be Prepare minutes that Minutes should be distributed meet at least four times per held at least once each document decisions made and as soon as possible but no year, and each time the quarter. All members are action steps following later than prior to the next company proposes to issue a expected to attend each meetings and review for meeting. press release with its quarterly meeting in person, via approval. ionrf oarnmnautailo ne.a rTnhinegsse  meetingstveildeepohcoonnef ecroennfceer.e  nce or Meeting minutes should be b combined with Telephone conf filed with the board of magyulaerl y scheduled meetings), meetings may beer ehneclde  more directors.  re y or more frequentl as frequently circumstances may require. . The Audit Committee may ask The agendas for meetings members of management or should be prepared and others to attend the meetings provided to members in and provide pertinent advance, along with information as necessary. appropriate briefing materials. 5. Conduct executive Establish these sessions in Develop action steps to be Review quarterly, and as sessions with the outside conjunction with quarterly taken, if appropriate. necessary. auditors, CEO (chief executive meetings or as necessary. officer), CFO (chief financial (See the tool “ Conducting an officer), chief audit executive Audit Committee Executive (CAE), general counsel, Session: Guidelines and outside counsel, director of Questions ,” in this toolkit.) financial reporting, controller, and anyone else as desired by the committee. 6. The Audit Committee shall A budget should be Report submitted by outside Review as needed. be authorized to hire outside established for this purpose. counsel or consultant. counsel or other consultants Requests for proposals as necessary. (This may take (RFPs) should be used if time place any time during the permits. year.) (See the tool “ Engaging Independent Counsel and Other Advisers ,” in this toolkit.)  
 
 
 
  Date Completed
 
 
 When to Audit Ste s to Achieve Committee Accom lish Fre uenc Charter the Objective Deliverable Due Date) 7. Review and concur in the Meet in executive session at Report to the full board on the Conduct ongoing reviews, as appointment, replacement, each meeting with the CAE. performance of the CAE changes can be made at any including the effectiveness of time during the year. rtehea sCsiAgEn. ment, or dismissal of Hold special meetings as may e internal audit function.  th be necessary to address (See the tool “ Guidelines for appointment, reassignment, or Hiring the Chief Audit dismissal of CAE. Executive ,” in this toolkit.) The audit committee chair should be available if any unforeseen issues arise between meetings relating to the CAE. Meet at least once annually with other members of executive management and the external auditors to discuss the performance of CAE. Discuss job satisfaction and other employment issues with the CAE.
               
  
  Date Completed
 When to Audit Ste s to Achieve Committee Accom lish Fre uenc Charter the Objective Deliverable Due Date) 8. Appoint the independent At least once each year, Report and recommend on the Review soon after year-end, auditors to be engaged by the discuss each of these items performance and fees paid to so that the recommendation company, establish the audit with management, the CAE, the independent auditors. for the appointment of the fees of the independent and the board of directors. Review the scope of all  outside auditor can be auditors, pre-approve any non- Review total audit fee in services provided by the included in the proxy audit services provided by the independent audit firm statement. independent auditors, rseelravtiicoens t ob eainnyg  nproonvaiduedidt  by the throughout the organization. including tax services, before the services are rendered. independent auditor. Review and evaluate the Discuss the Audit Committee s performance of the independ- review of the independent ent auditors and review with auditors with the board of the full board of directors any directors. proposed discharge of the Ascertain that the independent independent auditors. auditors do not perform any (See the tools: “ Sample nproonhaiubidtiet ds ebryv iScee ctthioatn  i2s 01 of Request for Proposal Letter for the Sarbanes-Oxley Act of CPA Services (Public 2002. Company) ,” “ Sample Request for Proposal Letter for CPA  Services (Nonpublic Organization ,” and “ Peer Review of CPA Firms: An Overview ,” in this toolkit.) 9. Ascertain that the lead (or Establish when the five-year Document these discussions Review annually with the concurring) audit partner from limit will be reached for the in Audit Committee meeting independent auditors. any public accounting firms current lead partner. At least a minutes performing audit services, year prior to that time, discuss serves in that capacity for no transition plans for the new more than five fiscal years of lead partner. the company. In addition, ascertain that any partner other than the lead or concurring partner serves no more than seven years at the partner level on the company’s audit.
 
 
  Date Completed
 
 
 When to Audit Ste s to Achieve Committee Accom lish Fre uenc Charter the Objective Deliverable Due Date) 10. Review with management Review policies and Report issues, if any, to the Review policies and the policies and procedures procedures annually. Discuss board. procedures at the second with respect to officers’ with chief audit executive the quarterly meeting and discuss expense accounts and need for testing by either the audit plan. pofe rcqouripsoitreast,e i nacslsuedtisn, ga tnhde ir use internal auditors, independent Review any significant findings consider the results of any auditors, or other parties. as they arise . review of these areas by the internal auditor or the independent auditors. 11. Consider, with Establish a policy for the Audit Document auditor selection Continually review the policy management, the rationale for Committee to pre-approve criteria. Also, use a decision and compliance with it. employing audit firms other tehneg aprgiinncgi paalu idintdoresp eotnhdeern tt han dmoactruixm teon te veaxltueartnea l aanudd itor Other auditors may need to be than the principal independent auditors. selection. hired at any point during the auditors. year. Use RFPs for engaging Prepare an engagement auditors or other professionals letter for each engagement. for nonaudit, or other services that the auditor cannot perform. Review compliance with the policy by management.  (See the tools “ Sample Request for Proposal Letter for CPA Services (Public Company) ,” and “ Sample Request for Proposal Letter for CPA Services (Nonpublic Organization) ” in this toolkit.)
      
  
  Date Completed
  When to Audit Ste s to Achieve Committee Accom lish Fre uenc Date Charter the Objective Deliverable Due Date) Completed 12. Inquire of management, Create a portfolio that Submit a risk report including Review at least once each the CAE, and the independent documents the material risks mitigation strategies and year, and more frequently if auditors about significant risks that the company faces. quantifiable risks and necessary. or exposures facing the Update as events occur. insurance to cover such risks, company; assess the steps Review with management and e.g., loss of business. management has taken or the CAE quarterly or sooner if proposes to take to minimize necessary, to make sure it is such risks to the company; up-to-date. and periodically review compliance with such steps. 13. Review with the Meet with independent audit Document the meeting in the At the second quarter meeting independent auditor, the partner, the controller and Audit Committee meeting each year, review the scope of controller of the company, and CAE to discuss scope of the minutes. the previous year’s audit, and the CAE, the audit scope and previous year’s audit, and the inter-relationship between plan of the internal auditors lessons learned. Later, the internal and external and the independent auditors. discuss planned scope for auditors with respect to the Address the coordination of audit of current year. scope of the independent audit efforts to assure the auditors’ work. rceodmupcltieoten noef srse dofu ncdoaventr aegffeo,r ts, At the third quarter meeting each year, review the plans for raensdo tuhrec eesf.f ective use of audit the audit of the current year. 14. Review with management Review reports of all internal Report on the status of all Review at each meeting. and the CAE: audits from the preceding 12 internal audits planned for the  Significant findings on months and planned for the next quarter and/or year. internal audits during the upcoming six months along year and management’s with the status of each responses thereto planned audit.  Any difficulties the internal audit team encountered in Review and discuss the the course of their audits, findings for each audit including any restrictions completed since the prior on the scope of their work rmesepetoinngs,e  atno dt hme arneapgoert.m ents or access to required information Discuss internal audit  Any changes required in department budget and the scope of their internal staffing with CAE. audit  
 
When to Achieve Fre uenc Due Date)   
   Audit Ste s to Committee Accom lish Charter the Objective Deliverable  The internal auditing Discuss internal audit’s department budget and compliance with IIA staffing Standards, including the  The internal auditing requirement for a peer review department charter once every five years.  Internal auditing’s compliance with the Institute of Internal Auditors’ (IIA’s) Standards for the Professional Practice of Internal Auditing (Standards) 15. Inquire of the CEO and Discuss “quality of earnings” Include in agenda for Review, as necessary, but at CFO regarding the “quality of with the CEO, CFO, and other executive sessions. (See the least annually. earnings” of the company from executives. Identify any issues tool “ Conducting an Audit a subjective as well as an addressed, and their Committee Executive Session: objective standpoint. resolution. Guidelines and Questions ,” in this toolkit.) 16. Review with the Review the reports of the Report to the board on issues Submit a comprehensive independent accountants and internal audit team for all relating to internal controls, report to the board at the the CAE: audits completed since the with emphasis on second quarter meeting each  The adequacy of the prior Audit Committee management’s ability to year. companys internal meeting.  omvoenrirtiodrei nagn ad nrelated Update on anything new or ccoonmtrpoultse irnizcleudd iinnfgo rmation Review key internal controls d testing. aconyn trcohl asnygstees mto,  taht ee ivnetreyr ,nal system controls and with the CAE, and understand how these controls will be security tested during the year. meeting.         
  
  Date Completed
When to Achieve Fre uenc Due Date)  
 
 
   Audit Ste s to Committee Accom lish Charter the Objective Deliverable  Any related significant Review these plans with the findings and independent auditor to recommendations of the understand their scope with independent auditors and respect to key controls. internal audit services Review with the CAE the plans together with for audits of other elements of management’s responses the control environment. thereto Determine that all internal ( C Se n e t  r t o h l: e   A to T ol o s o  l  Ifnotre trhnea l Audit control weaknesses are o quantified, reviewed, and tChoe mRmeisttpeoen , s ” i  b a il n iti d e Fsr aofu tdh ae nd addressed. Audit Committee: An Overview ” in this toolkit.) 17. Review with management Independently, through Record discussion and any Review as necessary. and the independent auditor professional reading and CPE, action steps in Audit the effect of any regulatory keep up-to-date on new Committee meeting minutes. and accounting initiatives, as developments related to the well as off-balance-sheet industry, and the environment structures, if any. in which the company (See the tool “ Managements operates, including any Summary of Off-Balance-regulatory requirements it may Sheet Transactions ,” in this be subject to. toolkit.) Discuss with management and the independent auditors in meetings.  18. Review with management, At a minimum, meet by Audit Committee approval of Review each quarter and as the independent auditors, and telephone prior to any the press release, and/or SEC needed. the CAE, the interim annual earnings release (annual or filings. financial report before it is filed quarterly) and any SEC filings with the Securities and such as 10-K, 10-Q, 8-K. Exchange Commission (SEC) or other regulators.   
 
  Date Completed
 
 
 
 When to Audit Ste s to Achieve Committee Accom lish Fre uenc Charter the Objective Deliverable Due Date) 19. Review with each public Discuss each matter, and Submit reports and Review, at least annually, accounting firm that performs related matters that may come documentation of discussions and/or in conjunction with the an audit: to the attention of the Audit and resolution of year-end audit.  All critical accounting Committee and/or the disagreements. policies and practices used independent auditors through by the company. this process.  All alternative treatments Create an action plan and of financial information follow-u ar . within generally accepted p plan as necess y accounting principles that have been discussed with management of the company, the ramifications of each alternative, and the treatment preferred by the company. (See the tool “ Issues Report from Management ” in this toolkit.) 20. Review all material written Discuss each item with the Submit reports and Review, at the completion of communications between the independent auditors and documentation of discussions, the independent audit. independent auditors and management (including the resolution of issues, and the management, such as any CAE) and conclude on the action plan for any items management letter or appropriateness of the requiring follow-up and schedule of unadjusted proposed resolution. monitoring. differences.           
  
  Date Completed
 When to Audit Ste s to Achieve Committee Accom lish Fre uenc Charter the Objective Deliverable Due Date) 21. Review with management Discuss each matter, and Submit reports and Review at the completion of and the independent auditors: others that may come to the documentation of discussions, the independent audit.  The company’s annual attention of the audit resolution of disagreements, financial statements and committee through this or action plan for any item related footnotes process, with management requiring follow-up.  The independent auditors’ (including the CAE) and the audit of the financial independent auditors. statements and their report thereon cRoeuvriseew  ofw iathc timona ntoa gbee mtaeknte tnh feo r  The independent auditors’ judgments about the aMnoyn iatcotri oann ry efqolulioriwn-gu fpo laloctwio-un p. quality, not just the acceptability, of the that requires continued audit company’s accounting committee intervention. principles as applied in its S financial reporting ( Ex e p e e t c h t e fr t o o m o  l t hDei Isncduesspieonnds etnot   Any significant changes Auditor ,” in this toolkit.) required in the independent auditors’ audit plan  Any serious difficulties or disputes with management encountered during the audit  Matters required to be discussed by Statement on Auditing Standards (SAS) No. 61, Communication With Audit Committees  (AICPA, Professional Standards , vol. 1, AU sec. 380), as amended, related to the conduct of the audit.
    
 
  Date Completed