Audit Committees:

A Self-Assessment Checklist
 Audit Committees:
A Self-Assessment Checklist

Table of Contents

Introduction.......................................................................................1

What is an Audit Committee?............................................................1

Leading Practices for an Effective Audit Committee...........................1

Assessing Your Audit Committee’s Practices........................................2

1. Audit Committee Structure and Operations................................................. 2
2. Oversight of Financial Reporting Process..................................................... 2
3. Effective Relationships with Auditors........................................................... 3
4. Compliance with Laws, Regulations and Internal Policies............................ 4

Conclusion.........................................................................................5
Audit Committees:
A Self-Assessment Checklist


Introduction Audit Committees form many of their

judgments of management’s performance
Transparency of disclosure and integrity of
based largely on the information and
financial reporting significantly contribute
feedback obtained from internal and
to enhancing public confidence in public
external auditors. Hence, developing an
sector organizations. The Boards of
effective working relationship with both
Directors and Senior Managers of public
external and internal auditors is essential
sector organizations are responsible for
for an Audit Committee to effectively
creating an environment of integrity, and
fulfill its oversight responsibilities.
demonstrating a strong commitment to
lawful and ethical behavior. The Board’s
Audit Committee plays a vital role in this
by ensuring the integrity and reliability of Leading Practices
the organization’s financial information, for an Effective Audit
the adequacy of its internal control Committee
processes, and that the entity operates
within their legislative mandate and in The Office of the Auditor General’s recent
compliance with all laws, regulations and report, Enhancing Audit Committee
internal policies. Practices in the Public Sector, outlines the
specific responsibilities, relationships, and
structures for an effectively functioning
What is an Audit Committee? Audit Committee. All public sector
Boards of Directors are encouraged to
The Audit Committee is regarded as establish a stand-alone Audit Committee,
the cornerstone of the Board’s oversight and to review and consider the leading
process and has critical governance practices discussed in the report within
responsibilities related not only to public their organization’s own unique context.
financial reporting, internal controls, and
management of financial risks, but also to
the oversight of an organization’s values
and ethics.
Audit Committees need to ensure
that all those involved in the financial
reporting and internal controls process
understand their roles, and carry out their
responsibilities in an efficient and effective
manner. Hence, Audit Committees
operate at the junction between the Board
of Directors and its external auditors,
its internal auditors, and its executive
management.
  Audit Committees:
A Self-Assessment Checklist

Assessing Your Audit  Does your Audit Committee

provide an orientation to new
Committee’s Practices members, as well as ongoing
To conduct a self-assessment of your training and development
Audit Committee, and whether the need opportunities for all members?
to strengthen and modernize its practices
exists, consider the following questions:
 Does your Audit Committee meet
 Does your Board have a stand- regularly throughout the year (for
alone Audit Committee, which example, quarterly)?
reports regularly to the Board of
• Is an annual calendar of
Directors?
predetermined meeting dates
• If not, has the Board discussed prepared to ensure all duties
and documented its rationale noted in the Charter are fulfilled?
for not needing an Audit • Are materials provided to Audit
Committee? Committee members sufficiently
in advance of meetings?
1. Audit Committee
Structure and Operations  Does your Audit Committee assess
its performance in fulfilling the
 Does your Audit Committee
duties and responsibilities set out
operate under a written Charter
in the Audit Committee Charter
(Terms of Reference), that clearly
annually?
articulates the role, composition,
and specific responsibilities that the • Is the assessment provided to
Audit Committee will perform? the Board, and are appropriate
actions taken to enhance the
• If so, is the Charter reviewed and
Committee’s performance, if
approved annually by the Board
required?
of Directors?

 Is your Audit Committee 2. Oversight of Financial

comprised of members who are Reporting Process
independent of management and  Does your Audit Committee
financially-literate? oversee the financial reporting
• If not all Audit Committee process and credibility of
members are financially-literate, the organization’s financial
are steps being taken to remedy information?
this (for example, through the • Are financial statements reviewed
provision of financial training)? and carefully scrutinized? Are
the key accounting principles
Audit Committees:
A Self-Assessment Checklist


as well as significant judgments systems performed by both the

utilized in preparing the financial internal and external auditors?
statements discussed?
• Does senior management  Does your Audit Committee review
provide adequate explanations of the Management Discussion and
all significant financial decisions Analysis (MD&A) report to ensure
and judgments made, as well as that it is clear for external readers
any significant variances and/ and is consistent with the financial
or deviations from approved statements?
strategic plans and budgets?
 Does your Audit Committee
 Does your Audit Committee have unrestricted access to all
understand and assess the information, documents and
organization’s financial and personnel as may be required to
business-related risks, and ensure fulfill its responsibilities?
plans are in place to mitigate those
risks?
 Does your Audit Committee seek
• Are discussions held regarding independent external advice or
unusual and/or complex assistance as needed?
transactions, new or risky
initiatives being undertaken, or
areas of financial/business risk 3. Effective Relationships
where significant judgment is with Auditors
required?  Does your Audit Committee hire
and manage the relationship with
 Does your Audit Committee the External Auditor, ensuring
understand and oversee independent communication, as
management’s internal control necessary?
framework? • Are meetings held regularly with
• Are any issues that may the External Auditor (minimum
negatively affect the financial twice per year)? Is the External
information generated Auditor’s audit approach and
from the internal control scope reviewed to ensure it
processes brought to the Audit sufficiently addresses any Audit
Committee’s attention? Committee issues or concerns?
• Does your Audit Committee • Are in camera sessions included
understand the nature and extent as part of every meeting with the
of testing on the internal control External Auditor?
  Audit Committees:
A Self-Assessment Checklist

• Does the Audit Committee 4. Compliance with Laws,

ensure management has taken Regulations and Internal
appropriate corrective action in
Policies
response to recommendations or
any significant matters noted in  Does your Audit Committee
External Auditor reports? monitor the organization’s
 Does your Audit Committee direct compliance with legislation,
and review the work of the Internal regulations and any legislative
Auditor, ensuring independent mandates, as well as public sector
communication, as necessary? reporting requirements?

• Does the Internal Auditor • Does the Audit Committee

report directly to the Board of review any public reporting to
Directors, as well as the CEO? ensure it portrays a complete,
Is the Board involved in and accurate and balanced picture of
approve the appointment and/or the organization’s performance
removal of the Internal Auditor? and financial situation?
• Does the Audit Committee
review and approve Internal  Does your Audit Committee ensure
Audit’s annual work plans and adherence to internal policies,
the scope of planned audits, as such as the organization’s code
well as their staffing and financial of conduct or conflict of interest
budgets? policies?
• Are in camera sessions held with • Are any issues, concerns or
the Internal Auditor? questions with respect to
conflicts of interest reviewed by
• Does the Audit Committee
the Audit Committee?
ensure management has taken
appropriate corrective action in • Does the Audit Committee
response to recommendations or review and approve expenses
any significant matters noted in and perquisites of the CEO, as
Internal Audit reports? well as approve any expenses
or perquisites incurred by the
• If no Internal Audit function
Board Chair and/or any Board
exists, has the Audit Committee
members?
considered whether one is
required?
 Has your Audit Committee
established a “whistle-blowing”
policy that encourages employees
to report not only illegal acts,
Audit Committees:
A Self-Assessment Checklist


but those that contravene the Conclusion

organization’s internal policies,
Ultimately, an effectively functioning
procedures, code of conduct, and
Audit Committee helps the Board of
ethical standards?
Directors ensure that it fulfills its overall
• Are whistle-blowing policies governance role of stewardship, leadership,
and procedures documented responsibility, and accountability for the
and clearly communicated to all organization.
employees?
We encourage all public sector Boards of
• Do whistle-blowing procedures Directors to establish a stand-alone Audit
allow for the confidential and Committee, and to review the detailed
anonymous submission of information on the responsibilities,
such matters? Does the process relationships, and structures for an
ensure matters are acted upon effectively functioning Audit Committee
confidentially and objectively? contained in our report, Enhancing
• Does the Audit Committee Audit Committee Practices in the
have the power and resources to Public Sector. As the size, mandate, and
investigate any matter brought complexity of public sector organizations
to their attention that they feel vary considerably, each Board of Directors
warrants review (for example, and their Audit Committee should
concerns specifically related to tailor these practices to meet the unique
Executive conduct or to financial circumstances and specific needs of their
reporting)? organization. Copies of the report are
available at www.oag.mb.ca.
For Further Information:
Visit our website at www.oag.mb.ca or contact us
for further copies of this pamphlet, or for any of our
reports.

Office of the Auditor General

500 - 330 Portage Avenue
Winnipeg, Manitoba R3C 0C4
CANADA

Phone: (204) 945-3790

Fax: (204) 945-2169
EMail: [email protected]
Website: www.oag.mb.ca