Corporates registered with the SEC in the US need to be aware of the sweeping changes affecting audit committees there, or risk being surprised by changing practices, according to a new study by Independent Audit Limited. The governance and compliance consultancy has warned companies, particularly in the UK, that they need to work out how to manage their risks in the new Sarbanes-Oxley environment, specifically the responsibility placed on audit committees to overview financial reporting and controls.
The audit committee's responsibilities are considerably increased under the new rules. It has to ?exercise active oversight? over implementation of Section 404 of Sarbanes-Oxley, which will require a detailed understanding of controls, regular meetings with internal audit and formally review all the documentation involved. And it is responsible for handling the external auditors, the first time auditors have reported to a body of non-executive directors ? the committee will have to establish that it, and not the management, is the client.
Independent Audit says in its study: ?Committees will need to look at how they get support in the face of ever-increasing demands. This could conceivably mean the use of dedicated secretariats. It could be the precursor of a different approach to the way non-executive directors manage their responsibilities.