The Institute of Internal Auditors wants more public sector entities to establish independent audit committees.
The IIA has released a new report, “Global Public Sector Insight: Independent Audit Committees in Public Sector Organizations,” making the case for the need to establish such committees.
The document also provides how-to information on developing an audit committee charter for public sector entities and ensuring that the responsibilities are appropriate and clearly defined. As the process moves forward, the report also recommends ways to assess the audit committee’s own performance.
The IIA report points out that a well-performing audit committee can benefit a public sector organization in many ways. For example, it can facilitate well-informed, efficient, and effective decision-making; promote and monitor an ethical culture; ensure compliance with a well-designed code of conduct; oversee an effective system of risk oversight and management; establish an efficient internal control system; monitor internal and external reporting of financial and nonfinancial information; and promote effective communication with internal and external audit and assurance providers and respond appropriately to matters they raise.
The document also provides a model audit committee charter that can be used by public-sector organizations that are looking to create an audit committee, along with the appropriate knowledge and expertise for the audit committee chairs and members.
The report recommends that audit committee members should receive training so they will understand the organization’s mission, current issues, structure, relationships, culture and key risks. An audit committee should know about the government environment—particularly any accountability structures—along with any relevant legislation or other rules governing the organization.
The report recommends way to address oversight of the organization’s values and ethics, governance, risk management, internal auditing, external assurance review, management action planning, financial statements and public accountability reports. The document also includes a glossary of terms.
At a time when the financial integrity of so many public sector entities has been called into question, the need for independent audit committees has never been greater to make sure that public funds are being spent wisely and honestly.