Audit committee reporting
09 February 2018
The FRC has published the first report from its Audit & Assurance Lab, “Audit committee reporting”. This is the first part of a planned two-stage project and relates to the audit committee section of the annual report: the second part will focus on auditor reporting to audit committees. Like the Reporting Lab, the Audit & Assurance Lab brings together investors, corporates, audit committees and auditors to discuss how reporting practice can be moved forward. A number of PwC’s Audit Committee Network members were involved.
Some key findings
- The report emphasises the importance of the audit committee’s role in the view of many investors.
- Investors value the role played by the audit committee and place reliance on its work.
- Both audit committee chairs and investors recognise that there is scope for further engagement (this is also encouraged in the proposed new UK Corporate Governance Code).
- The audit committee report can be seen as an indicator of the quality of the committee’s work, so has the potential to build trust and confidence among users.
- Audit Committee Chairs and investors overwhelmingly agree that audit quality should be a key factor in the audit tendering selection process.
- Investors would like to see more explanation around an audit committee’s non-audit services assessment.
The report also includes a number of questions for audit committees to ask and good practice examples in areas including auditor appointment and tendering, independence and effectiveness, significant issues and risk management and internal control.
Feedback from a number of audit committee chairs who have used the Lab report has been positive - it can be a useful tool to help with drafting the chair's personal introduction to the audit committee report in particular. Audit committee members may want to get involved in phase 2 of the project when it starts to express their views on what is useful in audit committee documents provided by auditors to audit committees.