1. Audit committees
1.1. Sub-committee of the board of directors, at least 3 independent NEDs
1.2. What does the audit committee do?
1.2.1. Monitor the integrity of F.S and any announcement abt F.S
1.2.2. Review internal controls and risk management system
1.2.3. Monitor and review the effectiveness of the internal audit
1.2.4. Make recommendations abt the (re)appointment, removal of external auditors
1.2.5. Review and monitor the independence and objectivity of the external auditors
1.2.6. Develop and implement policy on the engagement of external auditors to supply non-audit services
1.3. Benefits
1.3.1. Improve the quality of financial reporting
1.3.2. Create a climate of discipline and control to reduce fraud
1.3.3. Enable the NED to contribute an independent judgement
1.3.4. Help the finance director
1.3.5. Strengthen the position of external auditor and internal audit function
1.3.6. Provide a framework -> external auditors can assert his independence
1.3.7. Increase public confidence in the credibility and objectivity of F.S
1.4. Drawbacks
1.4.1. ED may not understand the purpose
1.4.2. Difficult to select sufficient NED
1.4.3. A formalised reporting procedure may dissuade the external auditors from raising matters of judgement
1.4.4. Costs may be increased
2. Communication with TCWG
2.1. The person(s) and org(s) with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity
2.2. Reasons
2.2.1. Assist the auditors and TCWG to understand audit-related matters -> develop constructive rela
2.2.2. Allow auditors to obtain relevant info
2.2.3. Assist TCWG to fulfill their responsibility to oversee financial reporting process -> reduce ROMM
2.3. Matters to be communicated
2.3.1. Auditor's responsibilities in relation to the audit
2.3.2. Planned scope and timing of the audit
2.3.3. Significant findings from the audits
2.3.4. Auditor independence
3. Codes of corporate governance
3.1. A system by which the company is controlled and directed
3.2. Ensure that all stakeholders are fully taken into account
3.3. OECD Principles
3.3.1. Promote transparent and efficient markets, clearly articulate the division of responsibilities
3.3.2. Protect and facilitate the exercise of shareholders' rights
3.3.3. Ensure equitable treatment of all shareholders
3.3.4. Recognize the rights of stakeholders and encourage active co-operation
3.3.5. Ensure timely and accurate disclosure is made on all material matters
3.3.6. Ensure the strategic guidance of the company, effective monitoring of management and the board's accountability to the company and shareholders
3.4. Standards of good practice
3.4.1. Leadership
3.4.1.1. Effective board leadership that promote long-term sustainable success
3.4.1.2. A clear division of responsibilities at the head of the company btw running of the board and the executive responsibility of the company's business
3.4.1.3. Chairman is responsible for leadership of the board and ensuring its effectiveness
3.4.1.4. Non-ex directors constructively challenge and help develop proposals on strategy (at least 1/2 of the board is NED)
3.4.2. Effectiveness
3.4.2.1. The board and its committees
3.4.2.1.1. Have the appropriate balance of skill, knowledge, experience and independence
3.4.2.1.2. Information should be supplied to in a timely manner and quality
3.4.2.1.3. Undertake a formal and rigorous annual evaluation of performance
3.4.2.2. Directors
3.4.2.2.1. A formal, rigorous and transparent procedure to appoint the new directors
3.4.2.2.2. Be able to allocate sufficient time to company
3.4.2.2.3. Receive induction on joining the board & regularly update and refresh their skills and knowledge
3.4.2.2.4. Be submitted for re-election st regular intervals
3.4.3. Accountability
3.4.3.1. The board
3.4.3.1.1. Present a balanced and understandable assessment of the company's position and prospects
3.4.3.1.2. Responsible for determining the nature and extent of the significant risks in achieving the company's strategic objectives
3.4.3.1.3. Maintain sound risk and internal control system
3.4.3.1.4. Establish formal and transparent arrangement - how it should apply the corporate reporting and risk management and internal control principles
3.4.3.1.5. Maintain an appropriate relationship with the company's auditor
3.4.4. Remuneration
3.4.4.1. Executive director's should promote long-term success of the company; performance-related elements should be transparent, stretching and rigorously applied
3.4.4.2. Formal and transparent procedure for developing policy on executive remuneration and fixing individual remuneration pakage
3.4.4.3. No directors should be involved in deciding their own remuneration
3.4.5. Relations with shareholders
3.4.5.1. The board is responsibility for ensuring that a satisfactory dialogue with shareholders, based on mutual understanding takes place
3.4.5.2. The board should use Annual General Meeting to communicate with the investors
4. Internal control effectiveness
4.1. Why does a company need internal control?
4.1.1. Help safeguard the company's assets
4.1.2. Help prevent and detect fraud
4.1.3. Help safeguard the shareholder's investment