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Empowering and elevating the image of the audit committee
In recent years the audit committee has become one of the main pillars of the corporate governance system in Belgian listed companies. The purpose of the audit committee is to enhance confidence in the integrity of an organisation’s processes and procedures relating to internal control and corporate reporting.
The Audit committee plays a key role in establishing a successful and credible financial reporting system and helps the board of directors in fulfilling its monitoring responsibilities in respect of control in the broadest sense. Listed companies have to establish an audit committee. The Law on the Audit Committee (transposing the provisions of European Directive 2006/46/EC) includes provisions on the composition and role of the audit committee.
An audit committee is exclusively composed of non-executive members , with at least one of them being independent. This independent member of the audit committee must have the necessary expertise in the field of accounting and auditing and has to fulfill the new independence criteria set out by the law. These new criteria are applicable to independent directors who are members of the committee entrusted with the assessment of intra-group transactions.
Role and work
The Belgian Corporate Governance Code includes additional recommendations regarding the establishment, the members and the actual role and work of audit committees. It stipulates, amongst others, that the chairman of the board cannot chair the audit committee. It is up to the board to satisfy itself that the audit committee has sufficient and relevant expertise to fulfill its tasks. The audit committee has an oversight function over the financial reporting process and internal controls, internal audit and risk management and is responsible for the review of the financial reporting. The audit committee is also responsible for the supervision of the external audit, the independence of the external auditor and may provide recommendations regarding the appointment of external auditors.