AUDIT COMMITTEES کمیته های حسابرسی

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CONTENT  SECTION 1 INTRODUCTION  SECTION 2 WHY?  SECTION 3 WHAT?  SECTION 4 CONCLUSION

SECTION 1 INTRODUCTION In case you forgot: In case you forgot: XeroxXerox EnronEnron HealthSouthHealthSouth Tyco InternationalTyco International WorldComWorldCom AIGAIG AdelphiaAdelphia

SECTION 1 INTRODUCTION These scandals, which cost investors billions of dollars when the share prices of the affected companies collapsed, shook public confidence in the nation's securities markets.

SECTION 1 INTRODUCTION Sarbanes-Oxley Act: Named after sponsors Senator Paul Sarbanes and Representative Michael G. Oxley

SECTION 1 INTRODUCTION Sarbanes-Oxley Act: SOX, is a United States federal law enacted on July 30, 2002 in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, and WorldCom.

SECTION 2 WHY DO WE NEED AUDIT COMMITTEES? 2.1 Governance requirements  Any organization is defined by its purpose. For a municipality it is most likely to be the provision of the highest level of services to the community it serves in a sustainable way and at the most economical rate.

2.1 Governance Requirements (Cont)  Governance is therefore essentially a function of  Leadership and Direction  Appropriate Risk Management and Control  Valuable Disclosure

The IIA Corporate Governance Model Effective Governance

SECTION 3 WHAT IS AN AUDIT COMMITTEE?  Definition In a publicly-held company, an is an operating committee of the Board of Directors, typically charged with oversight of financial reporting and disclosure. In a publicly-held company, an Audit Committee is an operating committee of the Board of Directors, typically charged with oversight of financial reporting and disclosure.

SECTION 3 WHAT IS AN AUDIT COMMITTEE?  How Are the Members Selected? Committee members are drawn from members of the Company's board of directors, with a Chairperson selected from the members. Committee members are drawn from members of the Company's board of directors, with a Chairperson selected from the members.

3.1 What Are The Objectives of An Audit Committee?  To assist the board in fulfilling its oversight responsibilities  To maintain effective working relationships with board, management, auditors

3.2 What Are The Responsibilities of An Audit Committee? Overseeing the financial reporting and disclosure process. Overseeing the financial reporting and disclosure process. Monitoring choice of accounting policies and principles. Monitoring choice of accounting policies and principles. Overseeing hiring, performance and independence of the external auditors. Overseeing hiring, performance and independence of the external auditors.

3.2 What Are The Responsibilities of An Audit Committee? Oversight of regulatory compliance, ethics, and whistleblower hotlines. Oversight of regulatory compliance, ethics, and whistleblower hotlines. Monitoring the internal control process. Monitoring the internal control process.

3.2 What Are The Responsibilities of An Audit Committee? Overseeing the performance of the internal audit function. Overseeing the performance of the internal audit function. Discussing risk management policies and practices with management. Discussing risk management policies and practices with management.

Key performance areas  Corporate governance: Compliance Compliance Ethics Ethics Effective and efficient control systems to prevent fraud, etc. Effective and efficient control systems to prevent fraud, etc. Governance by an audit committee implies oversight not management

Organizational arrangements  Appointment of members:  Majority of members not in the employ of the company  No councilors  Chairperson – not employee  Size of the committee  Large enough to represent a balance of views but small enough to operate efficiently  Size of the organization to determine – 3 to 6

Organizational arrangements  Membership requirements:  Critical success factor for performance  Accounting or related financial management expertise  Legal background  Ability to read and understand basic financial statements

SECTION 4 CONCLUSION ‘In the context of corporate governance, a proper balance needs to be achieved between the freedom to manage, accountability and the interest of different stakeholders’ The King Report

CONCLUSION (Cont) ‘ The mere existence of an audit committee is not enough. The audit committee must be vigilant, informed, diligent and probing in fulfilling its oversight responsibilities’ Report of the National Commission on Fraudulent Financial Reporting (Treadway Commission)

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