Communications with those Charged With Governance

Question 1

What does the term “those charged with governance” broadly interpret to encompass?

Answer 1

Board of directors and audit committee

Question 2

What is a committee of the board of directors, generally made up of three to five members of the board who are “outside directors”?

Answer 2

Audit committee

Question 3

Outside directors are individuals who are?

Answer 3

Neither employees nore part of management and who do not have a financial interest in the company

Question 4

Many companies have established audit committees because?

Answer 4

SEC has strongly recommended this action, and the NYSE requires all companies listed on the exchange to have audit committees

Question 5

What are the specific functions of the audit committee?

Answer 5

Selects and appoints the independent auditor and sets the audit fee, ensures that any recommendations made by the auditor are given proper attention, and evaluates the internal control of the company with the help of the independent auditor.

Question 6

What is a key element in the auditor’s communication with those charged with governance?

Answer 6

Communication with the audit committee

Question 7

How many times should the auditor meet with the audit committee without management present?

Answer 7

At least once each year

Question 8

Should those charged with governance also communicate relevant matters to the auditor?

Answer 8

Yes

Question 9

Who should communications be made to if no formal audit committee exists?

Answer 9

Full board of directors

Question 10

Significant audit findings should be communicated in writing or oral?

Answer 10

Writing

Question 11

Should oral communications be documented?

Answer 11

Yes

Question 12

For audits of issuers, communications are required to be made when?

Answer 12

Before issuance of the auditor’s report