Overview of a Terms of Reference for Audit Committee
What is a Terms of Reference for Audit Committee?
A Terms of Reference for Audit Committee is a document that will help the company improve its corporate governance by establishing an audit committee that oversees the financial reporting system and internal control procedures of a company.
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Before establishing this committee, you need to engage a sufficient number of non-executive directors to carry out the functions of this committee.
When should you use a Terms of Reference for Audit Committee?
You need the Terms of Reference for Audit Committee to govern the composition and procedures of this committee, set out details of its duties, and clearly define its authority (e.g. to have access to sufficient resources in order to carry out its duties and to seek independent advice at the company’s expense where necessary).
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In our document, we set out the typical basic duties of an audit committee. You are free to make offline changes to those duties where necessary.
Key points included
When drafting a Terms of Reference for Audit Committee, it is important to focus on a number of key clauses, in particular:
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- Purpose of setting up this committee;
- Number of members of this committee;
- Number of members to constitute a quorum for a meeting of this committee;
- Number of times that this committee will meet per year; and
- Details of the duties of this committee (where necessary, make offline changes to those duties).
