Audit and Assurance: Committee Functions, Oversight, and Effectiveness

This report provides a comprehensive overview of audit and assurance, focusing on the functions, benefits, and membership of audit committees. It delves into the regulations and oversight mechanisms designed to ensure the high quality of work performed by audit firms, emphasizing the importance of compliance with global and national standards. The report also examines the crucial role of the audit committee in ensuring auditor effectiveness, including the review of financial statements, internal controls, and risk management. Furthermore, it explores the benefits of an effective audit committee, such as actionable insights for improving financial practices and preventing fraud. The report references the collapse of Carillion to highlight the significance of corporate governance and the responsibilities of audit committees in maintaining the integrity of financial reporting and the importance of auditor independence and competence. The report also highlights the key pillars of the Financial Reporting Council (FRC) for audit firm stability, including values, risk management, evidence of audit quality, leadership and governance, and sound business models. The conclusion emphasizes the importance of an effective audit committee, its role in organizational risk management, and ensuring assurance to meet organizational needs.

AUDIT AND ASSURANCE

TABLE OF CONTENTS
TABLE OF CONTENTS..............................................................................................................2
INTRODUCTION...........................................................................................................................1
Function, Benefits and Membership of audit Committee............................................................1
Regulation and oversight for ensuring audit firms carrying to operate sufficiently with high
quality..........................................................................................................................................2
Role of audit committee for ensuring auditors to work effectively.............................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7
BIBLIOGRAPHY............................................................................................................................8

INTRODUCTION
In the present era, accounting organizations offer wide range of professional services to
its clients as they consider audit, assurance, review along with related services. These services
are directly regulated with multiple jurisdictions with need of compliance with global standards
and national requirements as they are directly based on international ones. The present report
will give brief discussion about functions, membership and benefits of audit committee. It will
reflect regulation and oversight for purpose of ensuring about audit firms that carry work in
sufficient quality. In the similar aspect, it will articulate about role which audit committee should
play for ensuring that auditors should carry their work in efficient aspect and in this context, it
will be explaining this subject with case of collapse of Carillion with lack of governance.
Function, Benefits and Membership of audit Committee
Audit committee is referred as one of major operating committees for organization's
board of directors as they charge over observation to financial disclosure along with reporting.
Each publicly traded organizations must be capable for maintaining audit committee which is
qualified in order for being listed on particular stock exchange. Further, committee members
should be form with independent outside directors such as minimum one person who is
replicated as financial expert (Audit Committees, 2018). The responsibilities and role of audit
committee are stated below:
According to UK Corporate governance code, the integrity of financial statements must
be monitored and any formal announcements on basis of financial performance. The review of
internal financial controls and separate board risk committee along with review of internal
control of organization and risk management system. In the similar aspect, review and monitor
the internal audit function's effectiveness. On the contrary, it makes recommendations to board
on basis of appointment and re-appointment with removal of external auditor. The remuneration
and with context of engagement has been approved through auditor. In the same series,
independence and objectivity of auditors with implementation and development of policy of non
audit service.
On basis of benefits of effective audit committee are referred as it gives actionable
insights to oversee and for improvisation of financial practices along with reporting as it meet
with its CEO and financial officers for reviewing and for maintaining its effectiveness about
organizational control along with external financial reporting. With context of insights and
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expertise on basis of legal, operational and management issues, audit committee members would
be playing proactive role with leadership team and auditors to form and periodically review
about prevention of fraud and detection of program to ensure about investigations with
uncovered fraud. However, internal audit function is also enhanced as financial reporting council
performs this by six largest audit firms for avoiding systematic deficiencies with network of
organization, disruption in statutory audit service's provision along with instability with context
of financial sector (Five Reasons Your Organization Needs an Audit Committee, 2018). The FRC
would be setting expectation of every audit firm and application of evidence its gains for purpose
of informing super-visioning program on these business entities. The key pillars of FRC are
about stability of audit organizations are:
 Values and behaviours
 Risk management and control
 Evidence on quality of audit such as FRC's annual programme of audit review about
quality
 Leadership and governance
 Business models and soundness in financials
The UK Corporate governance code gives that listed company boards for establishing
audit committee with at least three or in small organization two, independent non executive
directors. The audit committee in addition for independent non executive directors is appointed
as chairman and independent. On the contrary, US audit committee comprises three of more
independent directors. Every member must directly comply with requirements of financial
literacy of relevant securities exchange where is not needed of financial expert for one member
fir qualifying expert to avoid the disclosure. In the similar aspect, there is establishment of public
accounting oversight board to oversee audit of public organization on basis of U.S. Securities
laws and registration with subject to U.S securities law. In context of UK, there will be financial
reporting pane to grant powers as employees and auditors give information for carrying
investigation in company accounts which is defective (Bozkus Kahyaoglu and Caliyurt, 2018).
Regulation and oversight for ensuring audit firms carrying to operate sufficiently with high
quality
There are various occasions with competent authorities request for observing a registered
auditor's audit working papers related to audit. It carries out for functioning about review about
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quality of audit work and competent authority has to approve and amended. If request has gained
prior to complying, the written confirmation should be obtained to registered auditor and
oversight body either approved transfer and absence of prohibit as well. Further, oversight body
could prohibit transfers as its considerations would directly impact national interests of UK along
with legal proceedings on basis of transfer. So in this context, organization will be fully aware
about UK's legal proceedings and even finished on basis of any person or matter related to
requests as it must inform oversight body. In case request is granted, then it will be granted in
context of working paper of audit on basis of audit body which is considered as part of particular
group by issuing statutory consolidated accounts with competent authority and has listed
securities (Ismael and Roberts, 2018).
If transfer is a method of inspection in UK as approval from competent authority as
compared to oversight body with practice of audit inspection unit and must lead and participate
inspection. The audit inspection unit of oversight board has responsibility for reviewing audit of
its major client of audit. It comprises listed organizations and other big organizations, charities,
pension funds and others. In the similar aspect, it will also include audit of UK traded non- EEA
companies. The registration committee should be appropriately informed with gain of
registration auditor like audit client or existing audit clients as major audit client. It is useful for
registered auditors for purpose of informing registration committee as client will cease to be
major audit client even in absence of cessation of office. It also gives information as notification
with details of ending financial year of first of last audit which had been undertaken with
business entity.
The audit report has to include appropriate description about statutory auditor but with
absence to prevent a fir adding with proper description like 'chartered accountants'. In some
cases, law has requirement about responsible individual in charge of particular audit must sign
report of audit. The statutory responsibilities by FRC to oversight its various regulations of
numerous statutory auditors as recognition of professional bodies with supervisory bodies and to
offer professional qualification. It will assess on periodic aspect as it key regulatory task will be
delegated through FRC with competent authority as per its requirements of delegation
agreement. Its function will be related to authorisation and registration of statutory auditors and
firms, audit monitoring, discipline, professional development and discipline (Financial
Reporting Council, 2018).
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The statutory powers with context of oversight of audit regulations as to de recognise or
recognise qualified and supervisory bodies with requirement of information. The enforcement
order must serve RSB and RQB with failure of accomplishing statutory responsibilities. With
context of Audit quality review (AQR) team will be directly monitoring quality of statutory
audit's work and audit organization in UK which will retain scope through FRC. Each audit firm
of UK would be undertaking public Interest entities and large listed Non-EEA with subject of
AQR inspections in context to audit work. The frequency of inspection of AQR will generally
inspect and varies big firms which is inspected on annual aspect where other firms are inspected
once in every three years. The FRC will gain responsibility for purpose of monitoring audit
quality as in monitoring approach, it considers inspections of sample of audit and procedure on
basis of supporting audit quality at individual firm of audit (Ellis, 2018).
Role of audit committee for ensuring auditors to work effectively
The audit committee must be effective as it is note as simply complaint with specific
regulations and code as it is crucial element of structure of government and operated under
authority which is delegated of the board. The role and responsibilities of committees would be
directly documented in term of reference which must be reviewed annually and proposed to
board with approval. The chief audit executive must have presence of direct and unrestricted
access to chief executive and audit committee with its requirement. This committee will typically
consider various things such as internal controls and risk management systems, financial
statements about governance, internal audit process such as resourcing ans appointment, external
audit process, key performance data, compliance reports, regulatory inspection reports, whistle-
blowing, communication with shareholders on basis of activities (Farooq and de Villiers, 2018).
The audit committee is highly concerned with more of external process of audit and
financial control. As financial control is important, statistics represent the greatest source of loss
arose with mismanagement of strategic risks. Further, internal audit's remit and extends among
internal control framework and embracing strategic, financial, governance and operational
aspects. The key UK codes of high interest to audit committees are directly issued through FRC
as UK governance code and guidance on audit committee. Some sectors of economy have their
own annotated versions of codes place in environment where it is operating such as charities,
mutual financial services and social housing. An effective audit committee is not simple and
checks complaint with relevant regulations and codes as it is focused on organizational risk and
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ensures about assurance for meeting organisational needs and challenges with reports of auditors
and management for assuring about ensuring as robust.
In the present scenario, government has launched an independent review on basis of
financial reporting council, accountants, regulator for auditors and actuaries. Its main objective
is to make FRC as best for transparency and corporate governance, whereas it helps in fulfilling
function of safeguarding the leading business environment in UK. There was collapse of
Carillion which has given lesson that how to not perform corporate governance and organization
must set its opportunity for reassessing process. It has reflected major areas of weakness as red
flags were not raised whether via incompetence, negligence and complacency. Audit is referred
as vital component of corporate governance as it threatens trust in process and FRC will respond
quickly with announcement about investigation to operate in KPMG. With perspective of
governance, there are three major areas of concern as first is audit report as its unqualified audit
report is under scrutiny with FRC and investigation in role of KPMG in this collapse which will
be covering thee major aspects in audit such as going concern basis of accounting, accounting for
pensions and revenue recognition. As per KPMG it was audited in perfect manner as there is
presence of issue of audit independence and competition as there was step changing took place in
internal auditing, engaging directing work for helping board and senior managers for protecting
assets of organizations, reputation and sustainability (FRC to enhance monitoring of audit firms,
2018).
Henceforth, there are specific areas for paying attention while considering committee's
effectiveness considers its appointment, training, skills and experience of committee members,
frequency and attendance of meetings, participation of members, availability of support and
resources for assisting committee to fulfil its function. The relationship among committee and
providers of assurance along with committee and senior management as well. Further, reporting
relationship among board and audit committee as these codes would be required with explain of
comply approach as it is directly intended for allowing degree of flexibility in arrangements of
committee depends on business entity in similar aspect (Thompson, 2018).
CONCLUSION
From the above study it had been concluded that audit and assurance plays vital role for
attaining financial success and competitive edge. It has been shown that UK and US corporate
governance is almost similar but there is major difference which is related to financial expertise.
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It had been reflected that audit members should be transparent about their operations to business
entity and there should be effective relationship among its internal, external auditors along with
board of directors as well.
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REFERENCES
Books and Journals
Bozkus Kahyaoglu, S. and Caliyurt, K., 2018. Cyber security assurance process from the internal
audit perspective. Managerial Auditing Journal. 33(4). pp.360-376.
Ellis, R., 2018. Quality assurance for university teaching: Issues and approaches. In Handbook of
Quality Assurance for University Teaching (pp. 21-36). Routledge.
Farooq, M. B. and de Villiers, C., 2018. Sustainability Assurance: Who Are the Assurance
Providers and What Do They Do?. In Challenges in Managing Sustainable Business(pp.
137-154). Palgrave Macmillan, Cham.
Ismael, H. R. and Roberts, C., 2018. Factors affecting the voluntary use of internal audit:
evidence from the UK. Managerial Auditing Journal. 33(3). pp.288-317.
Thompson, D., 2018. Contemporary Challenges in Audit. In Contemporary Issues in
Accounting (pp. 125-143). Palgrave Macmillan, Cham.
ONLINE
Audit Committees. 2018. [Online]. Available through
<https://www.icaew.com/archive/technical/corporate-governance/uk-corporate-
governance/audit-committees>.
Financial Reporting Council. 2018. [Online]. Available through
<https://www.frc.org.uk/getattachment/88bd8c45-50ea-4841-95b0-d2f4f48069a2/2018-
UK-Corporate-Governance-Code-FINAL.pdf>.
Five Reasons Your Organization Needs an Audit Committee. 2018. [Online]. Available through
<https://www.aicpa.org/interestareas/notforprofit/resources/governancemanagement/five-
reasons-your-org-needs-an-audit-committee.html>.
FRC to enhance monitoring of audit firms. 2018. [Online]. Available through
<https://www.frc.org.uk/news/april-2018-(1)/frc-to-enhance-monitoring-of-audit-firms>.
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BIBLIOGRAPHY
https://www.icaew.com/archive/technical/corporate-governance/uk-corporate-governance/audit-
committees
https://www.frc.org.uk/getattachment/88bd8c45-50ea-4841-95b0-d2f4f48069a2/2018-UK-
Corporate-Governance-Code-FINAL.pdf
https://www.aicpa.org/interestareas/notforprofit/resources/governancemanagement/five-reasons-
your-org-needs-an-audit-committee.html
https://www.frc.org.uk/news/april-2018-(1)/frc-to-enhance-monitoring-of-audit-firms
https://www.emeraldinsight.com/doi/full/10.1108/MAJ-08-2016-1425
https://repository.up.ac.za/bitstream/handle/2263/64383/Farooq_Market_2017.pdf?
sequence=1&isAllowed=y
https://eric.ed.gov/?id=ED415735
https://scholarworks.waldenu.edu/cgi/viewcontent.cgi?article=7028&context=dissertations
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