This process is initiated by the Chairman of the Committee in consultation with the Chairman of the Board of Directors. The results of this exercise will make it possible to identify areas for improvement in the committee’s operations.
Why conduct a self-assessment?
Audit committees that conduct a self-assessment do so because (1) habits become rituals. Audit committee members no longer distinguish between rituals and the norm; (2) the company is changing. Governing bodies must adapt to the current needs of the company; and (3) regulations are changing. The regulator’s expectations of the audit committee are different.
What areas are covered by the self-assessment?
The main areas covered by the self-assessment are:
– the composition of the committee, the status of its members and their level of expertise in the committee’s areas of intervention
– the meetings, their number, the subjects on the agenda, and the profile of the stakeholders invited by the committee to examine the files
– the committee’s areas of intervention: accounting and finance, internal control, risk management and compliance, internal audit, and statutory audit, etc.
An example of a self-assessment questionnaire:
Who is involved in the self-assessment?
The first people involved in the self-assessment are the members of the audit committee themselves. The following people are usually asked to participate in the exercise: members of the board of directors, the statutory auditors, and some members of the general management.
The self-assessment is richer when a third-party expert is invited to take part. Not only does it facilitate the process, but it also suggests the implementation of good practices.
What are the benefits of this approach?
Measuring the audit committee’s performance against a standard reveals the strengths as well as the areas for improvement. The chairman of the audit committee, in consultation with the chairman of the board, will draw up a multi-year improvement plan.
An audit committee that assesses and improves itself enjoys greater confidence from the board of directors and the supervisory authorities. The results of the self-assessment can be reported at the general meeting or in the “governance” section of the annual report.
Governeo can assist your audit committee in the implementation of a self-assessment process.
