CG Code Section C: Accountability Flashcards
What is the first main principle of Section C?
The board should present a fair, balanced and understandable assessment of the company’s position and prospects.
What are the three main headings of the Accountability section of the CG Code?
Financial and Business Reporting
Risk Management and Internal Control
Audit Committee and Auditors
What is the second main principle of section C?
The board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives.
The board should maintain sound risk management and internal control systems.
With respect to risk management and internal control, what does the provision in Section C require?
That the board conduct (at least annually) a review of its risk management and internal control systems,
And report to shareholders that it has done so.
What should the board’s annual review of risk management and internal control systems cover.
All material controls:
Financial
Operational
Compliance
What does the third main principle of Section C state?
Board should establish formal and transparent arrangements for considering how they should apply corporate reporting and risk management principles,
And for maintaining appropriate relationship with company’s auditors
What does Section C require as to the composition of the audit committee?
At least three independent NEDs
Two, in the case of smaller companies
At least one member of committee should have recent and relevant financial experience
The main role and responsibilities of the audit committee should be set out in…
Written terms of reference
What seven responsibilities should the audit committee’s terms of reference include?
- Monitor integrity of financial statements
- Review internal control and risk management systems
- Monitor effectiveness of internal audit function
- Make recommendations to board regarding appointment and approve remuneration of external auditors
- Monitor external auditor’s independence and objectivity
- Implement policy relating to provision of non-audit services by external auditor
- Report to board on how it has discharged its responsibilities
Where there is no internal audit function, the audit committee should…
Consider annually the need for one,
Set out reasons for absence of function in annual report