The Board of Directors is responsible for closing the annual accounts. It entrusts the Audit Committee with the bulk of the work prior to this task. The Audit Committee does not carry out this work on its own but relies heavily on the services of the Statutory Auditors, who are the Audit Committee’s key contacts.
In March, the Statutory Auditors meet with the Audit Committee and report on their mission:
- They recall the main lines of the audit approach
The auditors explain (1) the audit methodology, (2) the scope of the assignment (3) the level of materiality, and (4) the accounting standards applied to the financial statements.
- They present the results of the engagement
Auditors communicate (1) the audit report, (2) significant and complex technical matters, (3) the estimates and judgments made by management, and (4) the scope of the subsidiaries audited.
- They confirm the basis for their independence
The auditors submit (1) a declaration of independence, (2) the list of the main partners of the audit team, and (3) the list of experts involved in the assignment.
In addition, they provide, as an appendix to their report, several documents that are essential to the understanding of their work:
- the audit plan
- the summary of the risk strategy
- the summary of uncorrected errors/differences in the accounts
- the list of significant weaknesses in internal control
- a summary of meetings and communications with the audit committee
- the written statements required in the “representation letter”
- the overview of “non-audit” services
- the “Key Audit Matters”
This package is very comprehensive and technical. The Audit Committee is given an explanation by the Statutory Auditors on the nature and scope of their work, the highlights of their engagement, and the impact of their conclusions on the financial statements and the annual report.
The Chairman of the Audit Committee resolves any outstanding issues (adjustment to the accounts, change in financial communication, internal control improvements, etc.). He/She then makes a recommendation to the Board of Directors to close the accounts and to submit them for approval at the annual shareholders assembly.
