In September 2011, the Financial Reporting Council released a publication on Effective Company Stewardship is response to concerns around the current value of financial statements. They concluded that audit committees should provide the narrative information that shareholders and other stakeholders are seeking and currently not finding in the annual report.
In a publication entitled The Buck Stops Here? New Challenges for Audit Committees: An Analysis of Audit Committee Reporting New Challenge Initiative, ICAEW’s Corporate Governance Committee suggest ways in which audit committees could improve their governance reporting to shareholders. These include:
- Effectiveness reviews – these are a vital feed-back mechanism and should be adopted for the internal and external auditors as well as the audit committee itself.
- Greater disclosure and commentary on the level and nature of non-audit services.
- Greater disclosure of how the external auditor has been engaged and retained.
Additionally, if current Financial Reporting Council thinking – that the remit of audit committees is extended to include consideration of the whole annual report and to ensure that the report is fair and balanced – is implemented, boards and audit committees will need to review terms of reference and governance frameworks to ensure that audit committee can discharge its extended remit.
Read more: The Buck Stops Here? New Challenges for Audit Committees: An Analysis of Audit Committee Reporting New Challenges Initiative