Part 10: Audit committees

10.01
Audit committees have a valuable contribution to make in improving the governance, and so the performance and accountability, of public entities. They can play an important role in examining an organisation's policies, processes, systems, and controls, through providing objective advice and insight. In doing so, they can identify potential improvements to governance, risk management, and control practices.

10.02
After some well-publicised international accounting and auditing failures in 2001 and 2002, there has been an increasing focus on the role of audit committees in the public and private sectors. Overseas regulatory bodies are intervening more to set clear governance and assurance standards and expectations. Although New Zealand might not legislate for mandatory audit committees, Parliament and the public expect the public sector to adopt governance principles that are consistent with good practice.

10.03
An effective audit committee shows that an organisation is committed to a culture of openness and continuous improvement.

10.04
Our Audit committees in the public sector good practice guide sets out the principles and practices needed to set up and effectively operate an audit committee in the public sector, and provides other useful resources such as example charters and checklists. The guide is not sector-specific. In our view, the principles and practices it outlines apply to the public sector as a whole.

10.05
The Auditor-General expects all public entities to consider setting up an audit committee in line with the good practices identified in that publication.