IIA-Australia News

New Audit Committee Guide

by User Not Found | May 24, 2017

Audit Committee Book

The Institute of Internal Auditors – Australia along with the Australian Institute of Company Directors and the Australia Auditing and Assurance Standards Board will launch the third edition of Audit Committees-A Guide to Good Practice in late June.

IIA-Australia CEO Peter Jones said revisions for the publication started in 2016 and was an effective collaboration between the three bodies.

He said the new edition contained many new elements, which reflected changes in the Act, revised standards and practices for external and internal auditors in the marketplace in the last five years.

IIA-Australia Board member, and the highly regarded audit committee expert Bruce Turner AM, and Manager Quality Services Andrew Cox, provided updated commentary for the publication.

As part of the update, the internal audit section has now incorporated a diagram showing functional reporting lines of Chief Audit Executive to CEO on administrative matters and directly to the audit committee on operational matters.

The updated third edition will include revised standards and four new appendixes, which includes a Management Representation letter in Appendix 3. Appendix 4 details the role of the audit committee within the governance environment of the organisation, and outlines the four pillars of governance as the audit committee, executive management, internal and external audit. For the first time it also includes the Three Lines of Defence model and diagram.

The first line of defence is management controls and internal control measures, the second line of defence includes financial control, security, risk management, quality, inspection and compliance, while the third line of defence is internal audit.

Mr Jones said if the three lines of defence is assessed as operating effectively , the audit committee can have a higher level of confidence the entity is well governed.

Appendix 5 is titled “Interactions with the audit committee within the IAASB Audit Quality Framework” also includes a diagram recognizing that audit quality is best achieved in an environment where there is strong support from other participants in the financial reporting chain.

For the first time in Appendix 6 there is a chart which defines the differences between external audit and internal audit. IIA-Australia, AICD and AUASB all recognized there was much confusion in the marketplace when both disciplines use similar terms, which are fundamentally different in the context of specific activities.

The best examples are the use of the terms Assurance, Independence, and Opinion, all of which have distinctly different meanings within external and internal audit.

Now audit committee members and directors can easily refer to the publication for clarification of terms.

The final Appendix 7 includes for the first time a work plan for sample calendar of events based on June 30 year-end, with an interim reporting period at 31 December.

The work plan includes a sample corporate reporting schedule, external audit activities, internal audit including approval of the internal audit plan, risk management, internal controls and fraud program, compliance and ethics and committee performance and reporting.

The new edition will be available from IIA-Australia from late June RRP $40.00 with discounts available for members.