By Babajide Komolafe
Audit Committee members should not accept management’s assertions and statements but ask probing questions and challenge their conclusions.
This charge was given by Mr. Gernot Hebestreit, Global Leader, Business Development and Markets, Grant Thornton International Limited, in a keynote address delivered at the Audit Committee Conference organised by the Audit Committee Institute in Lagos
“Please allow me to conclude with one aspect which is particularly important to me, the courage it takes to be an audit committee member and in making this statement, I draw on my own experience as a non-executive director and audit committee member.
“Our role is not to accept management’s assertions and statements at face value. We need to apply a critical mind set, ask probing questions and challenge conclusions. In short, we need to speak out and have difficult conversations. Only when we act in this capacity and still agree with management should we approve what needs to be approved at any given point of time,” he said.
Speaking on the theme of the conference, “The Audit Committee as a Governance Gatekeeper”, Gernot said, “Oversight function is a key aspect of gate-keeping. Oversight involves watchful and responsible monitoring of the affairs of the entity. Gatekeepers also need to be informed because having all relevant information enables them to perform the role society expects of them.
“In this contex,t it is important to note that the audit committee should not just wait until it receives information from management, or external or internal auditors, but should also proactively request information from them as and when needed. Further, audit committee members should not shy away from difficult conversations with management as part of their oversight role. It is the nature of the audit committee’s role to challenge management and only to reach a conclusion after a robust discussion of the underlying issues.
“While these are all important attributes, I believe that the most critical success factors for an effective audit committee are the competence and integrity of its individual members. In gate-keeping, competence and integrity are equally important, being multiplicative in their relationship. It takes competence to discern financial reporting flaws. But it takes integrity to report them.