The code requires that audit committees of an organization should comprise at least three members, a majority of whom should be independent. All members of the audit committee should be non-executive directors, and are financially literate. In addition, at least one should be a member of an accounting association or body.
Generally, there are several responsibilities of the audit committee. Firstly, audit committee is to consider the appointment of the external auditor, the audit fee and any question of resignation or dismissal.
Secondly, audit committee is to discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved.
Thirdly, audit committee is to review the quarterly and year-end financial statements of the board, focusing particularly on the item such as any changes in accounting policies and practices, significant adjustments arising from the audit, the going concern assumption and compliance with accounting standards and other legal requirements.
Forth, audit committee is to dues with issue related to internal audit functions. For examples, review the internal audit programme and results of the internal audit process and, where necessary, ensure the appropriate actions are taken on the recommendations of the internal audit functions.
Base on the case given, there are several issue...