Every New Year, in accordance with approved budgets, strategies and business plans, corporate managements enters the process of planning next year's tasks, structure and framework to create an operative business plan for 2013. This applies to management, directors as well as the boards and last but not least the recommended committees, including the audit committee.

In fact, the audit committee is the most influential committees as an extension of the Board responsibilities due to the complex accounting and tax management matters. In addition, the committee assists the supervisory board of control, risk management, audit and accounting issues, as the most basic elements of the committee's work

The old school audit committees focus on ensuring that the processes functions, the accounts are reliable and respond whenever an accounting-related problem occurs. In the future, the Audit Committee, due to the many complex tasks and responsibilities has to be much more proactive to fulfill their roles and responsibilities. The committee has to make sure that the right tools and methodology are available so that the A&F processes, reporting and disclosures are proactive and the appropriate, integrated and embedded risk assessments, governance procedures are in place thru IT automation.

The Audit Committee’s role in monitoring transactions for third party compliance is often an overlooked topic in corporate governance compliance worldwide. Current EU rules require companies to include in their annual accounts a note on transactions entered into with related parties, stating the amount and the nature of the transaction and other necessary information.

In future all third party transactions above a certain threshold should be subject to evaluation by an independent advisor and that the most substantial transactions should be approved by shareholders to strengthen the control over related party transactions.

Therefore, the audit committees 2013 focuses on Corporate Governance, Risk and Compliance (GRC) frameworks and road maps that define the company's good behavior by establishing a GRC organization. Ensure that there are IT tools to maintain the various components of compliance and regulations. Depending on the company issues like internal GRC controls, risk assessments, transparency, authentication and authorization, roles and responsibilities, board responsibilities, report the accurate accounting and reporting picture and the associated IT tools to accomplish these responsibilities.

Conflict of interest

The Audit Committee must also review and evaluate the company's reporting procedures, business processes, and internal controls.

One of the most significant issue in the execution of all the above is to ensure that roles, responsibilities and authorities are segregate. It is crucial that the external auditor is the auditor, the Board of Directors is the Executive Board and management manages. All functions need to have clear roles and responsibilities, with Chinese walls between them.

International Corporate Governance recommendations allow the company's independent auditors to be involved in the work of the Board through the Audit Committee and should report directly in unique situations. However the committee should perform the following:
- Evaluate the auditors' independence. This applies to both the external and internal audit
- Selection of external auditors to the Board of Directors and Annual Meeting
- Evaluate the tasks and assistance the external audit performs beyond the statutory audit. This will help to ensure the independent auditor's objectivity.
- Assess fees to the independent auditor, including fees for non declaration work
- Assess the audit quality

The oversight authority in the different countries has published a number of strategic focus points for 2013; these include self-assessments procedures, establishing assessment of the overall skills of each board or committee member to meet the requirements of the company.

The EU Commission is considering an initiative with a view to improving the transparency and conflict of interest frameworks applicable to proxy advisors.

Tone-to-the-top

Leading boards also take stock of what is going on in other companies and prioritize their own committee compliance, and assessment issues. The Audit Committee members must have the right accounting and auditing skills. Lack of accounting and tax management knowledge and expertise is often an issue when confronting the external auditors with complex issues.

The treatment of these, often quite confidential and complex issues, gets complicated when relationships and roles between the board, auditors and CFO get confused. Then the Independence may be questioned by conflicts of interest.¨

Complex and time-consuming implications
A confident and professional audit committee can then provide the Board with the right data, information and disclosures so that the Board can then concentrate and focus on strategy and long-term planning while the audit committee takes care of the time consuming accounting and legal implications.

Perhaps boards in unlisted companies should consider establishing audit and risk committees, in good time before the company eventually gets into trouble. The entire board must work with risk - but can usefully consider a small committee of experts for pressing issues at hand.

How do we ensure auditors independence in a world of free trade, competition and the desire for globalisation? Should there be EU uniformity in the approach by the oversight authorities to perform oversight of the accounting firms that perform audits of public interest entities? How do regulators ensure that supervision is based on generally accepted auditing standards?

The conclusion must be that audit committees are here to stay, and companies can place demands so that they do a better job than just check the box for the sake of formalities.
In 2013 one of the important task for the Boards will be to undertake a reassessment of how the audit committee's tasks, responsibilities, processes and agenda must be planned and organized to improve results and profits.