a.
Needs of audit for a big company
1.Audits can also help larger corporations work towards improving credit rating. In this aspect, it is quite important to realize the fact that audit tends to evaluate the company's financial statements, in the context of ensuring that the financial statements are free from any material misstatements or errors.
2.As a matter of fact that audit helps the companies to have a deeper insight and overview pertaining to the business functionality.
3.The process of audit and assurance helps the company to increase its credibility and trustworthiness in the general public too. As a matter of fact, this is something that contributes towards the growth of the company, in the sense that it establishes much-needed credibility and reliability of the company.
4.As a matter of fact, this greatly helps the companies to establish themselves as advocators of transparency, accountability, as well as assurance that the financial statements have been prepared in a proper manner.
5.If you own a larger company that has upper management or corporate investors, regular audits can provide reliability in your statements and inspire assurance that everything in your business is going as planned.
b.
The five elements of assurance engagement:
1. A three-party relationship, involving: the practitioner, a responsible party and intended users.
These parties are typically: the responsible party, users, and the practitioner.
2.· Appropriate subject matter.
This guidance looks at the questions practitioners should ask to identify which aspects of a subject matter to focus on in an engagement.
3.· Suitable criteria.
This guidance provides a definition of criteria and their characteristics, examines what ensure criteria are suitable.
4.· Sufficient, appropriate evidence to support the conclusion.
This guidance explores how materiality informs the assurance engagement risk posed by evidence.
5.· A conclusions contained within a written report.
This guidance outlines what commonly appears in such reports.
c.
Characteristics of Audit Committee:
1.Creating a Charter:
Once your audit committee is chosen, the group should be tasked with developing a smart and responsible charter that outlines its roles, responsibilities and how it will function. It should also include the audit committee's quarterly and annual responsibilities. As your organization grows and its risks and opportunities change, the audit committee's role will also expand. With that, audit committees should periodically review the audit committee charter for compliance with emerging best practices.
2. Monitor Financial Reporting:
Perhaps the most common task audit committees will oversee is reviewing and approving your company's financial statements to ensure they are complete, accurate, transparent and fairly stated in accordance with the applicable standards of the reporting jurisdiction. They will also work directly with the external auditor [selected and vetted by the committee] to review findings. The more information members understand, the easier it is for them to make their own recommendations for how to improve your company and its financial reporting.
3.Provide Risk Management Oversight:
On top of its essential financial reporting duties, the audit committee will work to identify your company's major risks, as well as review the existing internal controls that are in place to protect your company from those risks.
Increasingly, audit committees are identifying risks related to cyber security and lack of protections in information technology divisions that don't just arise from their own activities but risks that are created by the suppliers, customers and service providers that the company uses in the conduct of their daily business. Committee members should meet regularly with company management to help notify them of potential risks, as well as ensure that those risks are being monitored and proactive efforts are in place to mitigate future risks to an acceptable level.
4.Protect Your Company from Fraud:
As an independent entity, the audit committee helps ensure there are checks and balances in place to protect your company from fraud. The committee should perform an assessment of your company's risks to determine what type of fraud would most likely affect you and provide effective monitoring of these identified risks.
An audit committee should also establish separate mechanisms to promote the timely reporting of potential fraud directly to it so that any concerns can be promptly, thoroughly and completely investigated. They should review company policies for handling internal tips, ensuring there are no retaliatory measures being taken by the company against an employee for reporting potential fraud or other possible violations of laws and regulations. The committee must act as a conduit between employees and executives so that issues do not go unreported and complaints are properly investigated.