Overseeing the external auditors
Audit committees, management and the external auditor need to work together
As a key component of corporate governance, the audit committee serves as an independent and objective body responsible for overseeing the integrity of financial statements and ensuring compliance with relevant laws and regulations. Regulators view audit committees as vital gatekeepers who act as a check and balance mechanism to protect investors from potential financial misstatements and fraudulent activities. External auditors play a key role in helping the audit committee discharge this responsibility.
Building a strong working relationship with the external auditor
Creating the right relationship requires continuous communication, open and candid dialogue, and the ability to raise and address sensitive issues. Trust is the foundation. How do you build such a relationship? Here are some leading practices:
Be active in selecting the lead audit partner. Play a key role in the external auditor’s assignment of the lead audit partner.
Set clear expectations. Discuss the audit committee’s expectations with the lead audit partner upfront.
Have regular meetings with the lead audit partner. In between audit committee meetings and in preparation for upcoming meetings, the audit committee chair should have informal one-on-one meetings with the lead audit partner.
Make the most out of private sessions. Many audit committees have periodic private sessions with the external auditors, and some are required to do so.
Ask open-ended questions. Asking the external auditors open-ended questions can provide an understanding of their perspectives about sensitive and judgmental policies, accounts and transactions.
Go beyond the lead audit partner. It is important to build a relationship with someone at the audit firm other than the lead audit partner, for example, the senior relationship partner or quality review partner.
Contact us
Follow us
