On 12 September 2019, the Quoted Company Alliance (QCA) released a new and updated version of its Audit Committee Guide. This updated version of the guide, which is designed to help audit committee members, and especially the audit committee chair, to be more effective in their roles, succeeds the version dated November 2014.
The Guide outlines what the QCA regards to be best practice and is intended to accompany the organisation’s Corporate Governance Code.
How does the Guide differ from the 2014 version?
There are various respects in which the newly published Guide has been altered compared to its predecessor – including on such subjects as audit committee effectiveness, roles and responsibilities, risk management and internal control.
The new Guide, for instance, states that audit committees are most effective when they consist of a minimum of two independent non-executive directors. It underlines the importance of an adequate balance of skills, as well as the need for ongoing improvement.
Meanwhile, the updated Guide has also expanded the roles of the audit committee, its chair, the finance director and the company secretary. In this section, which will be of interest to those considering or drawing upon London Registrars’company secretarial expertise, the document states that the company secretary is not normally, and should not be, a committee member. Nor, unless this is impractical, should the company secretary be the finance director.
The parts of the document dedicated to risk management and internal control has also undergone significant expansion. It recognises, among other things, the dynamic and evolving risk landscape and the requirement for companies to think about risks in their extended business.
Building on this subject, it is advised in the Guide that the audit committee obtains a clear understanding of threats and opportunities, their potential impact and monitoring. Every committee meeting should also consider any new risks and any changes to the impact of risks.
The 2019 version lacks the anti-bribery and anti-corruption section that was contained in its 2014 counterpart, and the whistle-blowing section has also been reduced.
But those are not the only notable changes
Looking elsewhere in the Guide, a new section has been introduced on the subject of the audit committee’s relationship with external auditors, largely incorporating guidance from other sections of the 2014 version. New provisions are outlined here on tendering.
The annual cycle is also addressed in the latest document, this section’s guidance largely resembling that of the previous version. Further guidance does appear, however, in relation to new accounting policies, the payment of dividends and the audit opinion.
There is also a section on the audit committee report, covering additional features of the report. These features are with regard to auditor rotation, appointment, tendering, the risk and control framework and processes, and the internal assurance or audit function.
Finally, changes can also be found in the appendices: Appendix A (Work programme for the audit committee), which includes additional agenda items for the sixth month of the financial year in relation to approving audit fees and non-audit service provision policy, and Appendix B (Induction framework information pack). The information in Appendix B was previously included in the body of the Guide.
Contact London Registrars for further related guidance and know-how
There is much in the Guide that is of relevance to non-listed companies and we would advise you to consult London Registrars who can also give you the benefit of more comprehensive assistance and advice in respect of any of the points contained in the document.
Call our experienced professionals today on 020 7608 0011, to discuss the far-reaching company secretarial support that we can provide to free you up to focus more closely on your core business.
13 January 2020