[...]... reporting and related company law In appropriate cases, it may also include, for example, understanding financial statements, applicable accounting standards and recommended practice; the regulatory framework for the company’s business; the role of internal and external auditing and risk management 3.19 The induction programme and ongoing training may take various forms, including attendance at formal courses... the clarity and completeness of disclosures in the financial statements 5.2 It is management’s, not the audit committee’s, responsibility to prepare complete and accurate financial statements and disclosures in accordance with financial reporting standards and applicable rules and regulations However the audit committee should consider significant accounting policies, any changes to them and any significant... financial statements, including the operating and financial review, and corporate governance statements relating to audit and risk management Similarly, where board approval is required for other statements containing financial information (for example, summary financial statements, significant financial returns to regulators and release of price sensitive information), whenever practicable the audit. .. actions and judgements of management, in relation to the interim and annual financial statements before submission to the board, paying particular attention to: i critical accounting policies and practices, and any changes in them ii decisions requiring a major element of judgement iii the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed... of the internal audit function, the audit committee should, inter alia: • • • • • • ensure that the internal auditor has direct access to the board chairman and to the audit committee and is accountable to the audit committee; review and assess the annual internal audit work plan; receive a report on the results of the internal auditors’ work on a periodic basis; review and monitor management’s responsiveness... We consider that the Code itself needs to be expanded and strengthened in this area We propose the following: “D.3 Audit Committee and Auditors Principle The board should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the company’s auditors Code provisions... financial reporting and the audit process by ensuring that the external auditor is independent and objective and does a thorough job, and by fostering a culture and an expectation of effective oversight 8 We also see a wider role for audit committees, in typical circumstances, in ensuring that the company has sound internal financial control systems and systems for the control of non-financial risks,... that the auditor is independently minded and rigorous and that poor financial disciplines and bad financial reporting decisions are properly challenged and rectified The work of the committee should however go beyond catching inappropriate reporting or inadequate auditing Rather its work should be more pervasive and seek to build into the organisation a culture of compliance and fair reporting, an. .. clarified and enhanced This would be beneficial not only in increasing the level of assurance against catastrophic failure and gross malfeasance; it would also offer improvements on a wider front, raising the overall standard of corporate governance for all companies that implement our guidance What are audit committees for? 7 The primary role of audit committees is to ensure the integrity of financial... quality of the people concerned, their relationship with each other and more generally the ‘culture’ of the company, whereby the audit committee is seen as a source of strength for the company and its shareholders 23 It is not the role of the audit committee to prepare the company’s financial statements and disclosures in compliance with financial reporting standards and applicable rules and regulations