Audit Committee v. Revision Commission

Transcription

1 Audit Committee v. Revision Commission OECD/EBRD Conference on Corporate Governance of Banks in Eurasia Charles T. Canfield Senior Corporate Governance Officer International Finance Corporation April 30, 2008 London, England

2 An Audit Committee is not = a Revision Commission!!!

3 Definitions Audit Committee Revision Commission, aka audit committee and or audit commission

4 Definition - Audit Committee A Body formed by a company's supervisory board (board of directors) to oversee audit operations and circumstances. It selects and appraises the performance of the external auditor. In accordance with most jurisdictions, the Audit Committee must be composed of outside directors. Besides evaluating external audit reports, the Committee should oversee the internal audit function and should be involved with public disclosure of corporate activities. Often referred to as Audit Committee of the Supervisory Board (Adapted from the Business Encyclopedia)

5 Definition Revision Commission 1. A body elected by the shareholders to control the operations and financial activities of the company. (Azerbaijan CC) 2. A body elected by the shareholders that exercises control over financial and business activity. (Ukraine LOB) 3. Shareholders' body responsible for control over the commercial (financial) activity of management. (Ukraine company law) 4. Every Bank shall have an Audit Commission... Appointed by the AGM, of which no member shall be a member of the Supervisory Council of Management Board. (Law of GE on Activities of Commercial Banks)

6 Origins Audit Committee The SEC recommended the establishment of audit committees (the SEC recommended that shareholders elect the auditors at annual meetings and a committee of non-officer directors nominate the auditors. The NYSE had a similar recommendation The AICPA recommended that publicly held corporations establish AC to nominate the auditors and discuss the audit NYSE required each domestic corporation to establish and maintain an AC of outside directors Following recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees, SEC requires registrants to disclose information about AC composition and practices

7 Origins Revision Commission Asia FSU

8 Composition Audit Committee Members drawn from SB Independent Financially literate Leader should be a financial expert n-affiliated with the company Compensated Revision Commission Bank law, e.g. Administrators Remuneration/salary determined by AGM

9 Role and Responsibilities Audit Committee Financial Reporting and Disclosure Corporate Governance Internal Control and Risk Management Compliance and Ethics Oversee IA Revision Commission Operational control over financial activity Emerging AC functions

10 Effectiveness Audit Committee Quarterly meetings Qualified members Committee of SB Revision Commission meets once a year not qualified enough removed from executive body does not receive timely and relevant info formality

11 Why have an Audit Committee? Revision Commission: formal and ineffective Supervisory Board: lack of time and qualification Management Board: conflict of interest

12 RC in the FSU Country Armenia Azerbaijan Belarus Estonia Georgia Kazakhstan Kyrgyzstan Latvia Lithuania Moldova Russia Tajikistan Turkmenistan Ukraine Uzbekistan RC AC * * * *

13 The time has come to retire the revision commission Audit Committees are the better vehicle to help develop private enterprises An AC is key to good CG Conclusion

14 Thank you for your attention!