This is the third of five pieces from an internal audit perspective on the 2018 UK Corporate Governance Code: Non-Executive Recruitment (1), Viability Statements (2), Audit Committee Effectiveness (3), Culture (4) and the Workforce Voice (5).
Scandals and organisational failures continue to steal headlines away from good works. Corporate governance remains under the microscope. It is incumbent on audit leaders to take an active role in the effectiveness of governance within their own organisations to help rebuild trust in the world of commerce.
We look at what practical steps you can take as an audit leader to directly influence the effectiveness of your audit committee, the backstop of good governance. It is about taking action to make a difference not assessing effectiveness, providing assurance or creating an audit programme to test elements.
RECAP. On 16 July 2018 the Financial Reporting Council (FRC) published its long awaited update to the UK Corporate Governance Code together with revised Guidance on Board Effectiveness. The new Code applies for reporting periods starting on or after 1 January 2019.
The 2018 revisions support the government’s vision of restoring trust in the corporate organisations and the broader social reform agenda which aims to improve the standard of living and quality of life for ordinary working people.
The audit committee operates under the delegated authority of the board. Its tasks include reviewing the company’s internal controls, governance and risk management systems. To do this, it utilises subject matter experts to provide assurance and information ideally using the three lines of defence model not simply internal and external audit. Of this internal audit is the only independent source of information. An effective audit committee works in partnership with their internal audit function, agreeing the scope of its work, level of assurance sought, priorities and resources.