123 Up And Adam, Inc.
123 Up And Adam, Inc’s Board of Directors has started what shall be the organization’s Audit Committee. You might be asking what is an Audit committee and what are its Responsibilities?
Oversee the external audit process
- The audit committee will be directly responsible for the selection, appointment, compensation, oversight, and retention of the independent auditor.
- The Audit committee shall be involved with the selection of the auditor and shall review on an annual basis the performance and independence of the auditor.
- The committee shall participate in a planning meeting with the auditor to better understand the audit process and to provide insight to the auditor as to inherent risks that may exist in 123 Up And Adam, Inc’s operations.
Upon the culmination of the audit, the auditor shall report to the committee concerning:
- All critical accounting policies and practices
- The strength (or weaknesses) found within the internal control structure
- Alternative treatments of financial information within generally accepted accounting principles (GAAP) employed by management and the ramifications of their use over methods preferred by the profession and by the auditor
- Other matters of formal communications including
- The representation letter signed by management
- The letter to management and the full board covering suggestions for improvements to the systems of internal controls and in the financial accounting and reporting processes
- A schedule of adjustments proposed by the auditor and details of any unadjusted differences
An executive session with the auditor should be a matter of common practice for the audit committee. Staff should be asked to leave the meeting so that the auditor can speak directly and freely to the committee on matters concerning management and the organization, like:
- Any disagreements that may have occurred with management
- Any major issues that may have been discussed
- Whether the auditor is aware of management seeking consultation from other external accountants
- The capabilities of management and the finance department as it pertains to their contribution to the success of the audit
Oversee the Financial reporting process
Even though the auditor will help the organization’s Audit Committee fulfill its primary functions, will not eliminate the Audit Committee or Financial Committees responsibilities in overseeing 123 Up And Adam, Inc’s Financial Reporting Process and ensure that its Reporting Requirements are met.
123 Up And Adam, Inc’s monthly and quarterly financial statements are the way we as the board shall monitor the organization’s operations. The Audit Committee shall need to understand these methods used for reporting, How to enforce the systems to ensure accuracy, and demand timeliness of the data being received. These statements should be discussed with management, and management should be prepared to give a thorough analysis of the results and trends as well as its expectation for the near term future. The board of Directors, as well as all other Committees, shall need to pay close attention to the organization’s Risk Management and Internal Controls.
Assessing, the organization’s controls and processes will help us in determining if and where an error could go undetected such as misreporting which is fraud.
123 Up And Adam, Inc Internal controls provide supervisory checks and this is why the Audit Committee will need to be aware of management’s financial accounting and reporting processes. If financial reports or the audited annual report are untimely, or the organization’s infrastructure is unable to support its financial reporting needs, then we can see indicators that some risk is present. These internal controls will be able to help the Audit committee with ethical and compliance behaviors of all board and staff.
Our Audit Committee will ensure that all board and staff know that 123 Up And Adam, Inc takes its financial reporting very serious. The committee needs to be able to act on Issues not only to resolve them but install preventative measure. 123 Up And Adam’s Audit Committee shall establish specific procedures for handling complaints regarding finance, accounting, internal accounting controls, and audit matters.
123 Up And Adam’s whistleblower policy allows for confidential submission by Board or Staff on any of their concerns to questionable accounting, reporting, or auditing matters. The Audit Committee shall ensure that every Board member, Employee, and Volunteer receives a copy of the Whistleblower Policy.
Questions for the audit committee to ask include:
- Is there detailed planning for internal control documentation and evaluation?
- Did this work identify any weaknesses in internal controls?
- Do we have sufficient resources to maintain the key controls?
- Is our staff adequately trained in such matters?
Who should serve on the Audit Committee?
123 Up And Adam, Inc’s Audit Committee should be “independent” directors and have expertise in accounting and financial matters. Because there should be a segregation of duties between the audit committee and the finance committee, It is recommended that they should not share members. But, because the organization at this time has a limited number of board members with accounting and financial expertise, it will be acceptable for board members with this expertise to serve on the audit committee. Participation in audit committee formal deliberations and voting should be limited to independent board members. Staff, who are responsible for developing and maintaining financial controls, should not serve on the audit committee.
123 Up And Adam, Inc Audit Committee Charter
Audit Committee Charter
Our Audit Committee Mission
The Audit Committee shall assist the Board of Director in fulfilling its oversight responsibility with respect to the financial reporting process, the system of internal controls, the audit process and the 123 Up And Adam, Inc’s process for monitoring compliance with laws and regulations. The Audit Committee shall appoint and manage the outside independent auditor.
- The Audit Committee shall consist of at least three board members. All members of the Committee shall be independent directors.
- The Committee will be appointed by the President and will elect its Chair from among its members. All members of the Committee should be financially literate. At least one member should have an accounting background or related financial management experience.
- The Committee will meet twice a year/in January and October in connection with regularly scheduled meetings of the Board and otherwise as necessary. Board members who are not members of the Committee Do not have to attend meetings of the Committee except as invited by the Committee for consultation.
- A majority of the Committee shall constitute a quorum for the transaction of business at any meeting thereof, and the act of a majority of the members of the Committee present at any meeting at which a quorum is present shall be the act of the Committee.
Roles and Responsibilities
The Committee shall: A. Provide oversight to ensuring that the123 Up And Adam, Inc has an adequate system of internal controls and preparation of financial statements.
In fulfilling this responsibility, the Committee shall:
- Be directly responsible for the appointment, compensation, retention, and oversight including evaluation of the work of the outside auditor preparing or issuing an audit, or any related work (including resolution of disagreements between management and the outside auditor regarding financial reporting) and the outside auditor shall report directly to the Committee;
No member of the Committee may in the current fiscal year or in the previous fiscal year have been associated in the capacity of an employee or of compensated officer of the 123 Up And Adam, Inc. Nor may any member of the Committee accept, either directly or indirectly, any compensatory fee for consulting or advisory fees from the 123 Up And Adam, Inc.
- Review the outside auditor’s qualifications, independence, and performance
- Review the scope, approach, and cost of the audit
- Review 123 Up And Adam, Inc’s internal audit function, including review of the committee charter, activities, staffing and organizational structure of the internal audit function
- Review significant accounting and reporting developments and issues
- Review the annual financial statements audited by the outside auditors
- Review suggestions for improvements in internal controls from the internal and outside auditors
- Review and monitor 123 Up And Adam, Inc’s internal controls and exercise oversight of management’s handling of major financial exposures
- Review with the outside auditor any audit problems or difficulties and management’s response
- Establish procedures for the receipt, retention, and treatment of complaints or concerns received by 123 Up And Adam, Inc regarding accounting, internal accounting controls or auditing matters, including confidential, anonymous submissions from Staff or employees
- Exercise oversight of 123 Up And Adam, Inc’s process for monitoring compliance with legal and regulatory requirements
- Review and make recommendations to the Board with respect to retention of the independent auditor, and the audit functions
- Periodically review and assess the adequacy of the Committee’s charter and make recommendations to the Management and Governance Committee of changes
- Conduct an annual performance evaluation of the Committee and report its findings to the Chair of the Board
- Attend to such other matters as the Board of Directors may from time to time determine
- Maintain minutes of Committee meetings and report regularly to the Board.