Audit Committee Best Practices : Guidance for Corporations and Not-for-Profits Book

About the Author.

About the Institute of Internal Auditors.

Preface.

1. Evolution of Audit Committees.

Early Events.

SEC Regulatory, Legal, and Private Sector Initiatives.

Regulation Arising from Banking Scandals.

Stock Exchange Initiatives.

Sarbanes-Oxley Act of 2002.

Directors' Liability.

Private Company and Not-for-Profit Governance Initiatives.

Future Outlook.

Key Points in Chapter 1.

2. Full Board Responsibilities and Effective Board Processes.

Introduction.

Responsibilities of the Board of Directors.

General Responsibilities of Directors.

Importance of Being Fully Informed.

Specific Responsibilities of Directors.

Best Practices Boards Should Embrace.

Overview of Current Legally Required Board Member Duties.

Duties of Care and Loyalty.

Additional Duties.

Directors' Rights.

Areas of Special Concern for the Board as a Whole.

Recommended Elements of Board Practices and Processes.

Assessing the Effectiveness of the Board as a Whole.

Liability and Indemnification.

Key Points in Chapter 2.

3. Personal Characteristics of Effective Boards and Members.

Introduction.

Role and Authority of Independent Directors.

Characteristics of an Effective Board Member.

Core Competencies of an Effective Board.

Summary of the Director’s Role.

Key Points in Chapter 3.

4. Duties of Audit Committees Prescribed by Law, Regulation, or Rule.

Introduction.

Historical Development of Mandated Audit Committee Duties.

Source of Current Legally Required Duties of Audit Committees.

Report and Recommendations of the 1999 Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees.

Summary of Recommendations.

Overview of Currently Prescribed Duties and Responsibilities.

Formal Written Charter.

Principal Relationship with External Audit Firm.

Receipt of Confidential and Other Information.

Oversight of Financial and Other Disclosures.

Oversight of Internal Controls.

Oversight of Required Annual Assessment of Internal Control over Financial Reporting.

Oversight of Risk Management and Compliance Processes.

Additional Duties for Public Company Audit Committees.

Duty to Maintain Competence.

Legislative/Regulatory Sources of Selected Audit Committee Responsibilities.

Audit Committee Responsibilities Included in Sarbanes-Oxley Sections 301.

Selected Responsibilities Set Forth by the New York Stock Exchange.

Selected Responsibilities Set Forth by Nasdaq.

Key Points in Chapter 4.

Appendix 4A FEI Corporate Governance Checklist.

5. Overview of Additional Duties of Audit Committees Considered to Be Best Practices.

Recommendations of the Business Roundtable.

Recommendations of the Conference Board.

Guiding Principles of the Blue Ribbon Committee.

Eight Habits of Highly Effective Audit Committees.

Best Practices Related to Auditing and Internal Control.

Best Practices Related to Public Disclosure of Financial Information.

Audit Committee Oversight of Ethics and Compliance Programs.

Sarbanes-Oxley Requires Disclosure of Code of Ethics.

Stock Exchange Implementation of Code Requirement.

Requirements of the U.S. Sentencing Commission.

Guidance from the Open Compliance and Ethics Group.

Additional Audit Committee Best Practices.

Key Points in Chapter 5.

6. Necessary Characteristics of Audit Committees and Their Members.

Introduction.

Important Personal Attributes of Members.

Importance of Total Independence.

Portion of Section 301 of Sarbanes-Oxley Concerning Audit Committee Independence.

New York Stock Exchange Rule on Independence.

Nasdaq Rule on Independence.

Financial Knowledge Necessary.

Criteria for Assessing Audit Committee Effectiveness.

Key Points in Chapter 6.

Appendix 6A Audit Committee Performance Evaluation Questionnaire.

7. The Audit Committee and Its Charter.

Purpose and Contents of an Audit Committee Charter.

Key Points in Chapter 7.

Appendix 7A Sample or Model Audit Committee Charter (Statutory and Regulatory Perspective).

Appendix 7B Sample Audit Committee Charter from the Institute of Internal Auditors Research Foundation.

Appendix 7C Excerpts from Selected Actual Audit Committee Charters.

8. Audit Committee Oversight of Financial Statements and Financial Disclosures.

Audit Committee Duties to Oversee Financial Statement Preparation.

Audit Committee Duties Regarding Financial Disclosures.

Audit Committee Disclosure Duties Considered Best Practices.

External Auditor Requirements for Communication with the Audit Committee.

Summary of Audit Committee Responsibilities for Oversight of Financial Statements and Financial Reporting.

Key Points in Chapter 8.

9. The Audit Committee and Internal Auditing.

Introduction.

Internal Auditing Responsibilities.

Guidance for Audit Committees in Internal Auditing Professional Standards.

Guidance Provided by Credit Agencies.

Assessment of Internal Auditing Quality.

Importance of Resource Allocation Based on Approved Risk-Based Audit Plan.

Key Points in Chapter 9.

10. The Audit Committee and Risk Management.

Introduction.

Legally Required Duties Involving Risk Management.

Best Practices in Risk Oversight.

Process of Risk Management.

Enterprise Risk Management.

COSO ERM Integrated Framework.

Other Risk Management Frameworks.

Role of Internal Auditing in Risk Management.

Key Points in Chapter 10.

11. The Audit Committee and Internal Control.

Audit Committee Duties Concerning Internal Control.

Concepts of Control.

Sarbanes-Oxley Requirements for Management Assessment of Internal and Disclosure Controls.

Sarbanes-Oxley Requirements for Assessment and Reporting on Internal Controls and External Audit Attestation.

SEC Interpretive Guidance to Management on Its Evaluation of Internal Control.

PCAOB Audit Standard No.

AICPA Internal Control Guidance for Audit Committees.

Key Points in Chapter 11.

Appendix 11A Internal Control—A Tool for the Audit Committee.

12. The Audit Committee and Ethics-Related Initiatives.

Sarbanes-Oxley and NYSE Code of Conduct and Ethics Guidance.

U.S. Sentencing Guidelines Requirements.

Preventing and Detecting Fraud.

Examples of Codes of Conduct.

OCEG Ethics and Compliance Evaluation Tool.

Ethisphere Council Evaluation Criteria.

Key Points in Chapter 12.

Appendix 12A Seven Minimum Components of an Effective Compliance and Ethics Program under U.S. Sentencing Guidelines.

Appendix 12B UPS Code of Business Conduct.

Appendix 12C Google, Inc. Code of Conduct.

13. The Audit Committee and Information Technology.

Introduction.

IT Governance Concepts.

Objectives of IT Governance.

Audit Committee Involvement with IT Matters.

20 Questions to Ask about IT.

ITCi Controls for IT Governance.

Key Points in Chapter 13.

Appendix 13A IT Governance Controls Checklist.

14. Audit Committee Issues in Not-for-Profit Entities.

Introduction.

State Statutes Embrace Sarbanes-Oxley Requirements.

Federal Volunteer Protection Act of 1997 and Similar State Statutes.

IRS Reporting by Not-for-Profit Entities.

Entities Receiving Federal Funding.

Not-for-Profit Board Evaluation.

Key Points in Chapter 14.

Appendix 14A Board Self-Evaluation Scorecard.

Appendix 14B Checklist for Directors of Nonprofits.

15. Audit Committee Resources.

American Institute of Certified Public Accountants.

Association of Audit Committee Members.

BoardSource.

Conference Board.

Corporate Board Member.

COSO.

Deloitte Center for Corporate Governance.

Ernst & Young.

Financial Executives International.

Grant Thornton.

Huron Consulting Group.

Institute of Internal Auditors, Inc.

ISACA.

KPMG Audit Committee Institute.

National Association of Corporate Directors.

OCEG.

PricewaterhouseCoopers.

Protiviti.

Society of Corporate Secretaries and Governance Professionals.

Universities.

Glossary.

Index.