Abstract:
The way an audit committee communicates needs to reflect the context of its
relationship with the Board, which differs in every company. In order to be of
most use, minutes should be prepared and distributed very shortly after the
meeting. However, processes varied widely. The style of audit committee meeting
minutes is diverse; some are brief and anodyne, others are fuller and capture
the essence of the discussion. The most important aspect of the minutes is the
list of action points. Opinion diverged as to the usefulness of the committee's
formal minutes. Some took the view that they did not matter, others saw them as
an important tool in managing relationships, and in supporting the finance
director where appropriate. More important than the formal minutes is the oral
briefing given to the Board by the Chair of the audit committee. This is
generally both timely and comprehensive. It is one way in which all Board
directors can assure themselves that they are complying with their legal
responsibilities on making full disclosure to the external auditors. The
published report of the audit committee, included in a company's annual report
and accounts, is seen as a compliance matter and not as a helpful form of
communication. Extending its coverage was not seen as appropriate. The audit
committee operates as a sub-committee of the Board, but in all critical matters
its role is that of review rather than action. Accordingly, it was considered
that there is no need for any increase in the level of communication - formal or
informal - between the committee and investors.