Audit CommitteeRoles & Responsibilities

Audit CommitteeJuly 20, 2004

Audit Committee Roles

• Office of Internal Auditing Charter (Policy 1.D.)

• Hire Executive Director (Policy 1A.4 Part 5)

• Preserve Independence of Audit Function

• Set Tone for Ethical & Legal Conduct

Audit Committee Roles

• Approve Annual Audit Plan (June)• Select External Auditors (April)

– OLA– CPA firms

• Appraise Audit Quality– Review Audit Reports (Sept & Dec)– Annual Report (Sept)– Peer Review

Audit Committee Roles

• Monitoring– Significant Legal Violations– Unresolved Audit Findings– Performance Measurement

Sarbanes Oxley ActImplications for theAudit Committee

• Auditor Independence

• Audit Committee Structure & Responsibilities

• Ethics

Sarbanes Oxley ActAuditor Independence

• Objective is to ensure auditors: – Are free from potential or perceived

conflicts– Maintain professional, arms-length

relationship with management– Adequately assessing internal controls– Fulfill responsibilities diligently to detect

reporting problems.

Comparison to PolicyAuditor Independence

• Audit committee selects external auditor

• Auditors should be prohibited from non-audit work unless pre-approved by audit committee

• Lead audit partner should be rotated every seven years

• Current practice, could add to policy

• Current practice, could add to policy

• Contract is re-bid every three years, could require rotation as selection criteria

The Act MnSCU

Sarbanes Oxley ActCorporate Responsibility

• Objective is to ensure governing board: – Acts independently of management– Acts with integrity and resolves conflicts

appropriately– Understands and has expertise to examine

financial reports– Is fully informed in timely manner

Comparison to Policy Audit Committees

• Governing boards shall have an Audit Committee

• Members must be independent

• Oversees external auditors

• Includes at least one financial expert

• Current Policy

• Current Policy

• Current Policy, but consider adopting a Charter

• Consider role of candidate advisory council

The Act MnSCU

Comparison to PolicyEthics

• Senior managers should adopt a code of ethics and compliance measures

• Confidential employee complaint channel should be created

• Current practice - general statutory code of ethics. Consider – legislative additions for financial reporting and disclosure responsibilities

• Current practice – Policy requires reporting. Consider -establishing clear channel

The Act MnSCU