Last year we looked at how the Audit Committee works with Internal Audit. This month, it’s external audit’s turn. As with internal audit, the Committee both oversees external audit and is dependent upon it for information and assurance. However skilled and experienced an audit committee may be, it can be difficult to know how to add value when it comes to assessing audit quality, given that most of the work takes place out of the Committee’s sight and is recorded in audit files to which the committee doesn’t have access.
The audit profession and its regulators approach quality from a process-based angle which attaches much importance to documentation. The Audit Committee can take a different perspective. It knows the company, sees how it fits within its market, and understands how it ticks. This enables it to look at audit in a more holistic way.
Here we offer a few suggestions that we hope will help to increase and clarify the value which the Committee brings to the external audit process, as well as a few pitfalls to look out for along the way.