Toolkit
The Audit Committee Institute in Thailand has developed a Toolkit to provide examples of the reporting and documentation required by Audit Committees. The Toolkit, which is being continually built upon, will need to be adapted to the circumstances of individual audit committees and companies.
 Five Guiding Principles for Audit Committee
Oversight practices that work for one audit committee may not work for another; yet, certain “guiding principles” underline the effectiveness of every audit committee - even as specific oversight practices evolve to address changing risks, regulatory requirements, and corporate governance needs. In this ACI publication - Five Guiding Principles for Audit Committees - we consider five principles that help ensure oversight practices are applied effectively - that is, by the right people with the right information, processes, and perspectives.
Audit Committee Terms of Referrence
In essence, the audit committee’s terms of reference should define the scope of the committee’s oversight responsibilities and how these are to be discharged. The role of the audit committee is for the board to decide, subject to the Stock Exchange of Thailand’s requirements. Every audit committee should establish terms of reference that not only meets the minimum requirements but also is tailored to its specific needs and circumstances. This example is intended to assist an audit committee in creating or updating its terms of reference.
Potential Audit Committee Topics
Each audit committee should have a work plan that sets out how the committee intends to fulfil each of its responsibilities as disclosed in the terms of reference. Then, in setting each meting agenda, the audit committee needs to consider the responsibilities laid out in the terms of reference and related work plan. This paper is intended to help stimulate ideas when the audit committee develops its annual work plan.
Planning Framework for Audit Committee Meeting Agendas
This suggested agenda topics is not intended to be an exhaustive list. As with all of the guidance in the ACI Toolkit, the suggested agenda topics are intended to help audit committees ad boards of directors in evaluating the completeness of their terms of reference for their specific circumstances.
Private Session with the Auditor
At some point during the audit committee meeting, many committee agendas provide for the audit committee to hold separate in camera or private meetings with the external auditor. This ACI guidance note provides a framework for conducting the meeting.
Audit Committee Self-Assessment
The audit committee should regularly assess its own effectiveness and the adequacy of its terms of reference, work plans, and forums of discussion and communication. This ACI guidance note is a suggested framework for an audit committee’s annual review of its own effectiveness and the adequacy of its terms of reference and work plans.
Example questions - identifying and assessing risks
Boards may take several different approaches in identifying and assessing risks. The board may assume that responsibility itself or it may assign selected oversight responsibilities to one of more board committees. The audit committee needs to discuss financial risk management with senior management and the internal and external auditors. This guidance note contains high level questions that the board or its committees may wish to consider in framing their discussions with management. The list is not exhaustive.
Risks Warning signals
Members of the audit committee should identify some financial risk indicators because of their position as directors. Every organisation is unique, and each board should be alert to its own risk warning signals. This ACI guidance note provides a starting point for this kind of thinking. The note illustrates a key principle that directors should be risk-aware as they review reporting, operating and compliance issues.
Example Risk Summary and Register
Management is responsible for designing and implementing an effective system of internal control. The audit committee must determine that management has implemented policies to identify financial and other risks as well as adequate controls. It is important that the audit committee gains meaningful insight into the key sources of risk and how such risks are managed. This ACI guidance note is an example risk summary and register, designed to give audit committee members a quick insight into the key risks and the effectiveness of the controls in place.
Whistle-blowing procedures
The SET’s corporate governance principles make clear that the company must have an appropriate and effective mechanism for stakeholders to raise any concerns about financial reporting or other matters. Around the world, this is commonly referred to as “whistle-blowing”. Part of good whistle-blowing mechanism is to have a clear and concise policy on the matter that is openly available to all stakeholders. This guidance note contains an example that can be tailored to suit your own company’s specific circumstances.
Employment of Former Employees of the Auditor
The audit committee is responsible for overseeing the external and internal audit process. Several key elements exist in this task, including the need to agree on a policy for the employment of former employees of the external auditor, taking into account any relevant independence guidelines, governing the accounting profession. This ACI guidance note provides an example of such a policy.
Evaluation of external audit
This ACI guidance note contains a checklist framework for an audit committee to carry out a formal review of the effectiveness and efficiency of the external auditor. Such a review provides the audit committee with a disciplined approach to monitoring the auditor’s performance.
Example of internal audit plan
The audit committee should be involved in developing and approving internal audit’s mandate, goals and mission, to be certain of its proper role in the oversight function. A specimen internal audit plan is included in this ACI guidance note.
Evaluation of internal audit
The International Standards for the Professional Practice of Internal Auditing require the chief audit executive to put in place a mechanism for quality assessment of the internal audit function. This should be complemented at least every five years by an independent evaluation of the internal audit. Whilst the chief audit executive’s self assessment is valuable, the audit committee should look to draw its own conclusions based on its experience and contact with internal audit. This guidance note provides a framework which the audit committee can adapt when
reviewing the effectiveness of the internal audit function.
Audit Committee disclosures
Good governance requires companies to disclose in their annual reports to shareholders if the auditor provides non-audit services and how auditor objectivity and independence is safeguarded. Where the board does not accept the audit committee’s recommendation on the appointment or re-appointment of the auditor, this should also be commented upon. This ACI guidance note is an example of an audit committee disclosure statement.
External Auditor’s Aide Memoir
As part of the approach to the audit, external auditors should discuss or communicate on key aspects of corporate governance, with those charged with governance. This aide memoir is a tool for auditors that the audit committee may find a useful document that they wish to be aware of.
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"Communicating with Audit Committees since 1999"
Toolkit
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