By Peter Egwuatu
In order to prevent manipulation of financial statement and promote good corporate governance every quoted company has been mandated to establish audit committee.
Speaking at a workshop jointly organised by Financial Standard and Eminent Consulting Limited in Lagos on Tuesday, Mr. Kenneth Segun Odusanya said the Companies and Allied Matters Act (CAMA) 1990 has mandated every quoted company to have audit committee.
He stressed that the audit committees have legal responsibilities which continue to increase because of the recent happenings in the national economy and the need of various regulators to improve the reporting, corporate governance and control environment
According to him, â€œ In todayâ€™s business world the concept of corporate governance is no longer a fashion statement as it has been embedded in the statutes of many countries and is being promoted all over the world.â€
Odusanya explained that factors that gave rise to the need for good corporate governance practice in todayâ€™s business were that business corporations are no longer small in size, existence of multinationals, resources are now diverse and varied while also commanding large resources, both financial and human.
Other factors he mentioned was that companies are answerable not only to government, suppliersâ€™ lenders or their shareholders but also to the public at large (social responsibility).
Commenting on the role of audit committee, Odusanya stressed that the committee plays a significant role, standing at the intersection of management, independent auditors, internal auditors, and the board of directors.
According to him, â€œ To be effective, the audit committee must communicate openly with management through a clearly defined line of authority and thy must be willing to challenge management when appropriate. It is mandatory therefore that audit committee must be proactive, informed, investigative and accountable in all dealings.â€
Speaking as well at the workshop, Ms. Shade Ogundare, Managing Partner, Legal Partnership Consult Limited, said, â€œ Both the code of corporate governance for banks and CAMA recognise members of the audit committee. The choice of members is crucial to the success of the committee.
The members should be independent minded persons with integrity, healthy skepticism, knowledge of the company and industry and the courage to challenge decisions. Although not every one needs detailed accountancy and auditing expertise, at least one member should possess it and all should have a basic level of financial understanding. A good mix of ages, gender background and experience is also recommended.â€
She further noted that most management induced audit committees are more focused on internal control knowing fully that audit committee members may lack the knowledge and expertise to provide appropriate oversight in certain areas such as IT, and fraud, areas where management override of controls is most likely, adding â€œ In such instances, the committee should not be shy or hesitate in engaging outside advisers if the need requires it.â€