Attention Audit Committees! Are You Set For 2017? (Step 5)

Audit committees ("ACs") have taken on new roles since new regulation took effect earlier this year. In light of new questions that may arise, we've put together a 6-part series on the effects on ACs of the law of 23 July 2016 on the audit profession ("Law") and Regulation (EU) N° 537/2014 ("Regulation"). Read on for part 5, or browse our other articles first:

Step 5 - What kind of relationship should the AC maintain with the external auditor? Step 6 - What should the additional report of the external auditor to the AC include?

In this article, we'll focus on step 5.

The tasks of the AC

In relation to the statutory audit, ACs are usually tasked with:

making recommendations to the Board of Directors on the appointment, reappointment and removal of the statutory auditor ( see step 3), in addition to the compensation to be paid to the statutory auditor assessing and monitoring the statutory auditor's independence, in particular with regards to the provision of non-audit services by the statutory auditor ( see step 4) monitoring the effectiveness of the audit process and informing the Board of Directors about the outcome of the audit Maintaining an effective relationship with the statutory auditor is therefore paramount for the AC in exercising its oversight responsibilities. To obtain the statutory auditor's critical judgement, as well as insights that add value to the entity, the AC's responsibility overseeing the statutory auditor must consist of concrete actions (e.g. specific requests and communications) rather than just words in its terms of reference or items on its agenda.

On the statutory auditors' side

In addition to the usual communications made to the AC, like the management letter, statutory auditors of public interest entities ("PIEs") are now required to give more insights on the audits they carry out. New requirements include an enhanced audit report for financial statement users and an additional report for the AC.

In its audit...