Key Factors to Enhance Audit Committee Effectiveness

Certified public accountant Rohit Chakravarthy attended the University of Madras for his Bachelor of Commerce degree in accounting. At Amobee Inc., Rohit Chakravarthy serves as senior vice president and global controller, overseeing presentations and communications by the audit committee.

An effective audit committee is necessary for delivering credible financial reporting, internal controls, external audit functions, and risk management. Following are characteristics of an effective audit committee:

1. Transparency

Transparency on the process an audit committee used to accomplish its responsibilities allows a better review of its performance and efficacy. The committee must disclose its work as well as the primary areas of its planning and discussions. This disclosure must give insights on the fundamental matters the audit committee confronted with financial statements and how it handled such issues.

2. Productive Communication

Communication may be formal and informal, oral and written, communication with stakeholders. Additionally, the audit committee has to relate with the board to discuss and evaluate essential parts of the committee's task and all critical problems it has observed that require the board's engagement.

3. Appropriate Composition

Rules across various jurisdictions may differ, but there should be more than one member with financial reporting and accounting expertise, since the responsibility may be overwhelming on just a single member. Members should have diverse experience as well as industry knowledge and expertise to ensure their efficacy.