How to develop and improve the functioning of the audit committee The Auditor s View

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1 How to develop and improve the functioning of the audit committee The Auditor s View May 22, 2013 Helmut Kerschbaumer KPMG Austria

2 Audit Committees in Austria Introduced in 2008, applied since 2009 Audit Committees are mandatory for Public-interest Entities - Public (listed) Entities - very large Entities (exceeding the thresholds of a large large by 5 times) - Fully (100%) owned subsidiaries are exempted Functions assigned to the audit committee: Monitor the financial reporting process Monitor the effectiveness of the company's internal control, internal audit where applicable, and risk management systems monitor the statutory audit of the annual and consolidated accounts; review and monitor the independence of the statutory auditor or audit firm, and in particular the provision of additional services to the audited entity. 2

3 Financial Reporting: Lines of Defense and role of the auditor Level 1: Processes and internal controls True and fair financial reporting Level 2: Management Review (entity level controls) Level 3: External audit 3

4 Monitoring the statutory audit points to consider What does monitoring the statutory audit mean? Do make sure that the audit is performed in a professional manner Selection of the auditor (selection process and decision, independence, quality assurance) Audit scoping and selection/monitoring of auditors for group components Main features of the audit (audit firm/team experience, planned audit hours, fees, timetable, auditing standards) Soundness of audit plan (Risk assessment, focus areas, materiality levels, use of internal audit findings) Evaluation of audit findings and conclusions, unadjusted audit differences, management letter comments Audit report and auditor s opinion 4

5 4 years later. (our experiences) We have seen significant improvements: Functions assigned to the audit committee are always on the agenda at audit committee meetings and auditors are challenged with relevant questions. Enterprises have significantly improved the documentation relating to internal controls over financial reporting. Enterprise Risk Management Systems have been established in a professional manner (in most cases based on COSO). The role of the internal audit has changed to deal more frequently with internal controls and compliance and closely monitored by the audit committee. The audit committee is significantly more engaged with the statutory audit and the selection of auditors. 5

6 Thank you for listening Mag. Helmut Kerschbaumer KPMG Austria AG +43 (01)