Audit Committee Roles

1
Audit CommitteeRoles Responsibilities

• Audit Committee
• July 20, 2004

2
Audit Committee Roles

• Office of Internal Auditing Charter (Policy 1.D.)
• Hire Executive Director (Policy 1A.4 Part 5)
• Preserve Independence of Audit Function
• Set Tone for Ethical Legal Conduct

3
Audit Committee Roles

• Approve Annual Audit Plan (June)
• Select External Auditors (April)
• OLA
• CPA firms
• Appraise Audit Quality
• Review Audit Reports (Sept Dec)
• Annual Report (Sept)
• Peer Review

4
Audit Committee Roles

• Monitoring
• Significant Legal Violations
• Unresolved Audit Findings
• Performance Measurement

5
Sarbanes Oxley ActImplications for theAudit
Committee

• Auditor Independence
• Audit Committee Structure Responsibilities
• Ethics

6
Sarbanes Oxley ActAuditor Independence

• Objective is to ensure auditors
• Are free from potential or perceived conflicts
• Maintain professional, arms-length relationship
  with management
• Adequately assessing internal controls
• Fulfill responsibilities diligently to detect
  reporting problems.

7
Comparison to PolicyAuditor Independence
The Act
MnSCU

• Audit committee selects external auditor
• Auditors should be prohibited from non-audit work
  unless pre-approved by audit committee
• Lead audit partner should be rotated every seven
  years

• Current practice, could add to policy
• Current practice, could add to policy
• Contract is re-bid every three years, could
  require rotation as selection criteria

8
Sarbanes Oxley ActCorporate Responsibility

• Objective is to ensure governing board
• Acts independently of management
• Acts with integrity and resolves conflicts
  appropriately
• Understands and has expertise to examine
  financial reports
• Is fully informed in timely manner

9
Comparison to Policy Audit Committees
The Act
MnSCU

• Governing boards shall have an Audit Committee
• Members must be independent
• Oversees external auditors
• Includes at least one financial expert

• Current Policy
• Current Policy
• Current Policy, but consider adopting a Charter
• Consider role of candidate advisory council

10
Comparison to PolicyEthics
The Act
MnSCU

• Senior managers should adopt a code of ethics and
  compliance measures
• Confidential employee complaint channel should be
  created

• Current practice - general statutory code of
  ethics.
• Consider legislative additions for financial
  reporting and disclosure responsibilities
• Current practice Policy requires reporting.
  Consider -establishing clear channel