LETTERS: Audit committee offers value beyond scrutiny of books

The Nakuru County Assembly.
The Nakuru County Assembly. An audit committee should ensure the integrity of county or company’s financial reports, among other roles. FILE PHOTO | NMG 

An audit committee commonly consists of three to four individuals led by an audit chairperson, but it could just as easily be organised as a task force.

Sometimes the audit committee is essentially the same as the organisation’s finance committee. Regardless of structure, each member of the audit committee should be completely independent of the organisation in order to serve in the most objective manner possible. A clearly written charter helps the audit committee and others to understand its role and responsibilities, and is an essential starting point.

Over the years, the roles and responsibilities of boards of directors — specifically, of the board’s audit committee, if in existence — have become increasingly demanding and scrutinised. While today’s audit committee must encompass a level of financial literacy, independence, and knowledge about risk management and internal control; individual audit committee members must be deeply committed, highly experienced, and fully qualified to effectively carry out their varied responsibilities. Among the many important roles the audit committee plays within an organisation, is to provide internal audit oversight.

An audit committee provides actionable insights to oversee and improve financial practices and reporting. In high-performing organisations and governments, audit committees provide oversight.They meet with the governor, CEO and financial officers to review and maintain effectiveness of organisational controls and external financial reporting. They often work in partnership with the finance committee, which is typically focused on internal reports, operational issues and financial strategy.

The audit committee is normally responsible, on behalf of the governor or board, for ensuring the integrity of the county’s or company’s financial reports. This important role includes reviewing draft financial statements and other price-sensitive material before publication factored into the county’s or company’s timetable for releasing such material.


Time for these reviews and any follow-up work will need to be written in the charter. These reviews must be sufficient to allow the audit committee to explain to the rest of the board or governor how the company or county proposes to report its financial results. To be able to review financial statements effectively, audit committee members need to understand the accounting concepts that affect the reporting status, and also need to be able to constructively challenge management and the external auditor on key subjective or complex areas.

The team must have a constructive working relationship with executive.

Audit committees create and maintain effective anti-fraud programmes, with their insights and expertise in financial, legal, management and operational issues, audit committee members can play a proactive role working with an county or organisation leadership team and auditors in creating and periodically reviewing an organization-wide fraud prevention and detection program and ensuring that investigations are undertaken if fraud is uncovered.

They can also encourage the organisation’s leadership team to establish a comprehensive ethics and compliance programme. The audit committee should play a similarly proactive role in the review and update of both of these programmes.

An organisational structure that has the internal audit team reporting directly to the audit committee contributes to the overall integrity of the internal audit function.

Under this structure, the internal audit team can serve as the audit committee’s “eyes and ears” regarding the organisation’s ability to meet its financial and compliance responsibilities and ensure that the organisation adjusts practices and internal controls as needed.

An audit committee meets with external auditors to monitor their services and activities to ensure that independence is maintained between the external auditor and the organisation’s management team. An audit committee also meets with external auditors to discuss their independent observations on management’s ability to maintain strong internal controls, appropriate financial reporting and sound business practices.

An audit committee communicates a message of independence, reliability and trust. It also builds confidence among present and potential constituents, donors, creditors, and other stakeholders.

The county government or company should implement the recommendations of the audit committee, for better management of financial resources.

Ndirangu Ngunjiri Audit committee member, Nakuru County.