COMMITTEE
Compiled by:
Muhammad Faisal Siddiqui
Internal Audit Officer
Brookes Pharmaceutical Laboratories (Pakistan) Limited
Stage: P-I
Institute of Cost & Management Accountants of Pakistan
If silence is golden, speech is platinum. It bears testimony to this fact and for that matter
spreads wisdom, dispels ignorance, ventilates our own country is a classic example of it.
grievances, stimulates curiosity, lightens the
spirits and lessens the fundamental loneliness Requirement of Internal Auditor
of the soul. according to CCG
As per CCG “There shall be an internal audit
A ABJECT function in every listed company. The head of
U ULTERIOR internal audit shall have access to the chair of the
D DISCREPANCY Audit Committee. All listed companies shall
I IS ensure that internal audit reports are provided for
T THROWN AWAY the review of external auditors. The auditors
shall discuss any major findings in relation to the
With increasing attention to financial reporting - reports with the Audit Committee, which shall
by legislators, regulators, security analysts, report matters of significance to the Board of
institutional investors, and others – the roles of Directors".
boards of directors, audit committees, corporate
management, and external and internal auditors
Appointment & Qualification of
are changing. The relationships between these
entities are being reshaped by legislation and Internal Audit
regulations. The process of identifying emerging There is a weakness in CCG that the
principles, practices, and tools for the internal qualification of Internal Auditor is not
auditor's role in internal controls over financial mentioned so can any one be Internal Auditor?
reporting is defined by Securities and Exchange The answer is no. Then who are eligible for this
Commission of Pakistan (SECP) as Code of post? The eligible ones are the qualified
Corporate Governance (CCG). members of ICMAP, IIA, ICAP and other
accounting bodies’ members.
Code of Corporate Governance (CCG)
Governance is a buzz word today. At times, Audit Committees
though, it may not precisely be understood. For a Audit committees and internal auditors have
common understanding, it may be the process common goals. A good working relationship
which is employed to run government state with internal auditors can assist the audit
affairs encompassing entire spectrum of committee in fulfilling its responsibility to the
activities, they may be administrative, legal, board of directors, shareholders, and other
religious, socio-political, economic or others. outside parties. This position statement
summarizes the appropriate relationship between
In the contemporary political thought, it is audit committees and internal auditing. Audit
governance process which leads to overall committee responsibilities encompass activities
national development, in particular, economic which are beyond the scope of this statement,
development. Economic development is and in no way intends it to be a comprehensive
unimaginable and cannot even be dreamed off description of audit committee responsibilities.
without there-being 'good governance' in place.
It is such an essential ingredient that without it Every public company have an audit committee
even the on-going development process would organized as a standing committee of the board
get retarded. Contemporary political history of directors. The establishment of audit
committees in other organizations is encouraged, Composition of Audit Committee
including not-for-profit and governmental According to CCG “The Board of Directors of
bodies. every listed company shall establish an Audit
Committee, which shall comprise not less than
The primary responsibilities of the audit three members, including the chairman. Majority
committee should involve assisting the board of of the members of the Committee shall be from
directors in carrying out its responsibilities as among the non-executive directors of the listed
they relate to the organization's accounting company and the chairman of the Audit
policies, internal control, and financial reporting Committee shall preferably be a non-executive
practices. The audit committee should establish director. The names of members of the Audit
and maintain lines of communication between Committee shall be disclosed in each annual
the board and the company's independent report of the listed company”.
auditors, internal auditors, and financial
management. Frequency of Meetings
The Audit Committee of a listed company shall
The audit committee should expect internal meet at least once every quarter of the financial
auditing to examine and evaluate the adequacy year. These meetings shall be held prior to the
and effectiveness of the organization's systems approval of interim results of the listed company
of internal control and the quality of by its Board of Directors and before and after
performance in carrying out assigned completion of external audit. A meeting of the
responsibilities. Internal auditing may be used as Audit Committee shall also be held, if requested
a source of information to the audit committee by the external auditors or the head of internal
on major frauds or irregularities as well as audit.
company compliance with laws and regulations.
Attendance at Meetings
To ensure that internal auditors carry out their
As described in CCG “The CFO, the head of
responsibilities, the audit committee should
internal audit and a representative of the external
approve and periodically review the internal
auditors shall attend meetings of the Audit
audit charter, a management-approved document
Committee at which issues relating to accounts
which states internal audit's purpose, authority,
and audit are discussed.
and responsibility. The audit committee should
Provided that at least once a year, the Audit
review annually the internal audit department's
Committee shall meet the external auditors
objectives and goals, audit schedules, staffing
without the CFO and the head of internal audit
plans, and financial budgets. The director of
being present.
internal auditing should inform the audit
Provided further that at least once a year, the
committee of the results of audits, highlighting
Audit Committee shall meet the head of internal
significant audit findings and recommendations.
audit and other members of the internal audit
The audit committee should also determine
function without the CFO and the external
whether internal audit activities are being carried
auditors being present”.
out in accordance with the CCG.
Conclusion
The tasks, responsibilities, and goals of audit
committees and internal auditing are closely
intertwined in many ways. Certainly, as the
magnitude of the "corporate accountability"
issue increases, so does the significance of the
internal auditing/audit committee relationship.
The audit committee has a major responsibility
in assuring that the mechanisms for corporate
accountability are in place and functioning.
Clearly, one of these mechanisms is a solid,
well-orchestrated, cooperative relationship with
internal auditing.