Audit Committee

The audit committee exists because oversight of reporting integrity and internal control needs more time and expertise than a full board meeting can give. Concentrating this work in a small group of non-executive directors makes scrutiny deeper and protects the independence of auditors, who need a route to the board that does not pass through management. For owners, a strong audit committee is the guarantee that the numbers, and the control statements behind them, were questioned by someone with no stake in the answer. It is where independent assurance is received and acted on.

The committee runs on terms of reference approved by the board, a standing annual agenda and the right to meet auditors without management present. Membership requirements, including financial expertise, are usually set by the governance code. In practice, resilience enters through assurance: the committee receives internal audit's review of the continuity programme, questions why two high-rated findings from last year remain open, and asks the CEO to commit to a closure date recorded in the minutes. That follow-through, not the report itself, is the committee doing its job.

The common failure is overload: the committee becomes the destination for every risk and compliance topic, and scrutiny gets thin exactly where it should be deep. Many boards respond by creating a separate risk committee and keeping audit focused on reporting and assurance; either design works if duties are explicit and nothing falls between the two. Treating committee review as a formality to be minuted is the other trap. How boards structure assurance is covered in ERGP module M6, on assurance.