External Reporting Issues for Audit Committee Chair- myassignmenthelp

Question: Discuss about theExternal Reporting Issues for Audit Committee Chair. Answer: Introduction Audit committee is essentially the body that controls the auditing process of a particular organization, reviews its quality and executes the audit of the respective organization. An audit committee is concerned with the aim to make sure that the organization is complying with the laid down rules and regulations and makes sure that audit at regular intervals is carried out. It also keeps a vigilant eye on the internal control of the organization and makes sure that the internal audit is carried out effectively (Li, Mangena and Pike 2012). The different characteristics of an audit committee An audit committee with an independent audit committee chair An audit committee with an independent audit committee chair has certain advantages and disadvantages as well. The advantages lie in the fact that an audit committee with an independent chair is independent of any kind of control. The management in no way can influence the committee and the audit carried out by the committee is manipulated or influenced by nothing as such. The independence of the committee should be reviewed from time to time though. The only disadvantage of such an audit committee is that if any of the members of the committee does not pertain to the auditing standards then that particular member has to complete his or her minimum term and then only can be removed (Cohen 2013). An audit committee with majority independent members An audit committee with majority independent members represents a balanced concept. This is because an audit committee with majority independent members can be both controlled and also can be independent as the case may be. In case of such an audit committee the particular company should have laid down policies and procedures that monitor the constantly changing relationship or situations between the company and the committee. This is because the majority being independent members might influence the reports and therefore must be controlled (Aldamen 2012). An audit committee with a higher proportion of members with accounting expertise An audit committee with a higher proportion of members with accounting expertise will have added benefits as the execution of the regular functions of the audit committee are carried out with higher proficiency. The audit committee members along with monitoring of the activities of the company, keeping a vigilant eye on whether the policies and regulations are seriously followed by the company and whether the internal control of the company is carried out effectively, the financial statements of the company can also be monitored and reviewed. Higher proportions of members with accounting expertise also lead to the fact that the company will get new accounting ideas and methods which will help the company to earn more revenue (Badolato, Donelson and Ege 2014). Conclusion GWA Group Limited will be benefitted by the audit committee with majority independent members. This is because the GWA Group Limited is a going concern and will benefit more with the balanced concept. Both control and independence is essential for a proper audit committee to be constituted for GWA Group Limited. References Aldamen, H., Duncan, K., Kelly, S., McNamara, R. and Nagel, S., 2012. Audit committee characteristics and firm performance during the global financial crisis. Accounting Finance, 52(4), pp.971-1000. Badolato, P.G., Donelson, D.C. and Ege, M., 2014. Audit committee financial expertise and earnings management: The role of status. Journal of Accounting and Economics, 58(2), pp.208-230. Cohen, J.R., Hoitash, U., Krishnamoorthy, G. and Wright, A.M., 2013. The effect of audit committee industry expertise on monitoring the financial reporting process. The Accounting Review, 89(1), pp.243-273. Li, J., Mangena, M. and Pike, R., 2012. The effect of audit committee characteristics on intellectual capital disclosure. The British Accounting Review, 44(2), pp.98-110.