The Association of Corporate Treasurers welcomes the proposed guidance on audit committees issued by the Financial Reporting Council's group chaired by Sir Robert Smith.
It is particularly important that Sir Robert recommends that audit committee training include risk management - which we presume to be widely defined and not confined to financial risks. Indeed, we believe that all directors and not just the audit committee members should have such training.
Sir Robert recommends that the audit committee include appropriate financial expertise where the company's activities involve specialised financial activities. We go further and believe that there should be experience in the area of corporate finance, financial risk management and treasury operations on the audit committee of all substantial companies - not just accounting experience as Sir Robert recommends.
We particularly welcome the proposed strengthened relationship between the audit committee and the internal auditor. However, without a recommendation that the committee be consulted on the appointment, removal and remuneration and benefits of the internal auditor (often a relatively junior member of management) this could be greatly devalued.
We are concerned by Sir Robert's proposal that no one other than the audit committee‘s chairman and its members is entitled to be present at a meeting of the audit committee. We believe that all independent non-executive directors should be able to attend all board committee meetings to avoid the risk of a cabal burying an issue. A non-executive director of Enron concerned about the company's actions could under this proposal have been obstructed in his pursuit of reassurance.
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