Organizations: Companies after implementing ACs may face issues of co-coordinating them with SBs. Mr. Shih thinks that ACs are stronger than SBs, and he also referred to some scholars’ suggestion of “abolishing” SBs. But Mr. Xu asserted that a vertically integrated system would be a better idea. Opinions on the co-ordination of the two supervisory institutions differ among the interviewees and the scholars. Understanding the co-ordination between SBs and ACs therefore should be set as further research objective to research the linkage in the hierarchy on the preference for the interaction linkage between the SB and the AC and related parties. Both listed companies have higher expectations of the effective performance of AC as part of the internal supervisory mechanism and both may have lost their confidence in the effectiveness of SB in China, and therefore, they do not expect that SB can lead AC in improving the effective performance of supervision in the future. Integration is based on the belief that it can be beneficial in reducing lack of independence, the most serious problem impacting upon the effective performance of supervision of CG in China, and can also solve hierarchical reporting problems of the internal supervisory mechanism of all the institutions in one organization. In this way, integration may bring about a positive co-ordination of their functions, to reduce costs and improve the effectiveness of the internal supervisory mechanism. Integrating all in one of combining AC, SB and Internal Audit in one entity; or promoting the AC; or establishing a vertical link allowing AC report to SB directly which may be the best preference to improve the effectiveness of monitoring functions between these two different institutions of internal supervisory mechanism calls for further researches.
13. Monitor the rotation of the partners of the Auditors on the Company’s audit engagement team as required by applicable law and to consider periodically and, if deemed appropriate, adopt a policy regarding rotation of auditing firms.
14. On an annual basis, consistent with Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, of the Public Company Accounting Oversight Board (United States), receive and review written disclosures from the Auditors delineating all relationships between the Auditors, or their affiliates, and the Company, or persons in financial oversight roles at the Company, that may reasonably be thought to bear on independence and a letter from the Auditors affirming their independence, to consider and discuss with the Auditors any potential effects of any such relationships on the independence of the Auditors as well as any compensation or services that could affect the Auditors’ objectivity and independence, and to assess and otherwise take appropriate action to oversee the independence of the Auditors.
The focal issue to this procurement is the requirement for the individual as non- executive of the audit council to have between them the required experience and aptitude to have the capacity to release their oversight works adequately. As per Song and Windram (2004) a high level of financial proficiency is important for an audit brain trust to adequately supervise an organization’s reporting and financial control. The part of an audit brain trust in supervising responsibility of the organization because the activity of the committee would cover and monitor the management and financial reporting. This requires the audit panel to have accounting information concept to procure an inside and outside comprehension of financial reporting and enhance consistency with administrative necessities.
External auditing is an important corporate governance mechanism. Several extant studies investigate the relationships betweenaudit fees and other corporate governance mechanisms. Carcello et al. (2002) examine the association betweenboard characteristics and audit fees. On the one hand, they argue that high quality boards would be more concerned with effectively fulfilling its monitoring duties and thus would be more supportive of external auditing. These boards are more willing to increase audit scope, resulting in higher audit fees. Thus, there could be a positive association betweenboard governance quality and audit fees. On the other hand, Carcello et al. (2002) contend that high board governance quality may reduce the auditor’s assessment of control risk as board governance may substitute to external auditing, which may decrease audit effort and thus audit fees. Consistent with the argument on the positive impact of board governance on audit effort, Carcello et al. (2002) document that audit fees increase in board independence in U.S. This suggests that outside directors may demand for more audit effort to protect corporate stakeholders and themselves.
SBs. After 2006, the newly amended Chinese Corporate Law significantly enhances the role played by SBs. They find that before the new corporate law became effective, SBs did not affect executive compensation, although their role after that became significant. Ding, Wu, Li, and Jia (2010) explain that China’s CG system implements both American and German style mechanisms, but the SB, a typical feature of German style governance, is generally considered dysfunctional. Xiao, Dahya, and Lin (2004) examine how SBs function in Chinese-listed companies. Particular attention is paid to the problems that are faced by the SB and to the likely causes and consequences of these problems. Gorton and Schmid (2004) document that under the German CG system of co-determination; employees are legally allocated control rights over corporate assets through seats on the SB—that is, the board of non-executive directors. Firth, Fung, and Rui (2007) find that the types of the dominant shareholder, the size of the SB, and the percentage of independent directors have an impact on the frequency of modified audit opinions. Qin (2007) examines the relationship between corporate performance and the characteristics of the SB. He suggests that the SB functions effectively in China and that improving SB functions could result in better corporate performance. One specific proposal for improving the SB system advanced in Wei and Jiang (2010) is to create public supervisors and creditor supervisors. Bezemer, Maasen, and Van Halder (2012) suggest that a separate board with the power to influence management through consent, advice and incentives is an effective, pre-emptive form of monitoring. Block and Gerstner (2016, p50) find that the American board has begun to reflect German two-tier model in function if not in form and they remark “The heightened monitoring standards for boards and the rising importance of committees has made the one-tier board in America more akin to a multi-tiered board.” Block and Gerstner (2016) stressed that another important monitoring task is the supervision of executive actions, where effectiveness depends on (1) independence from management, (2) information access and (3) overcoming operational challenges.
P ETER P ODGORELEC & I ZTOK K OLAR
Direct cooperation between the Supervisory Board and an internal auditor increases the independence of the latter and simultaneously enhances the effectiveness of the Supervisory Board and its AuditCommittee. An independent internal auditor can constitute an important source of information for the Supervisory Board / AuditCommittee, which is particularly important in terms of preventing and discovering fraud, including that which involves the members of the Management Board. The authors advocate an amendment to the Auditing Act by extending the obligation to inform referred to in the first indent of the third paragraph of Article 39 to established increased risks for fraud or other illicit acts committed by employees or members of the Management Board. This obligation should apply to both the annual report auditor as well as the head of the internal audit service. Other substantial issues pertaining to internal company audits aimed at strengthening independence of the internal auditor should also be regulated by law.
professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, and any steps taken to deal with such issues, and (iii) all relationships between the independent registered public accounting firm and the Company.
4. Evaluate annually the qualifications, performance and independence of the independent registered public accounting firm, including a review of whether the independent registered public accounting firm’s quality-control procedures are adequate and a review and evaluation of the lead partner of the independent registered public accounting firm, taking into account the opinions of management and the Company’s internal auditors, and report to the Board on its conclusions, together with any recommendations for additional action.
The AuditCommittee shall have the authority, to the extent it deems necessary or appropriate, to retain special legal, accounting, or other consultants to advise the AuditCommittee. The Company shall provide funding, as determined by the AuditCommittee, for payment of compensation to the independent auditors and to any advisors employed by the AuditCommittee and for ordinary administrative expenses that are necessary or appropriate in carrying out the Committee’s duties. Any communications between the AuditCommittee and legal counsel in the course of obtaining legal advice shall be considered privileged communications of the Company, and the AuditCommittee shall take all necessary steps to preserve the privileged nature of those communications.
C. Alameda Corridor Transportation Authority (ACTA) Agreement
In August 1989, the Port and the POLB (the Ports) entered into a joint exercise of powers agreement and formed ACTA for the purpose of establishing a comprehensive transportation corridor and related facilities consisting of street and railroad rights-of-way and an improved highway and railroad network along Alameda Street between the Santa Monica Freeway and the Ports in San Pedro Bay, linking the Ports to the central Los Angeles area. The Alameda Corridor began operating on April 15, 2002. ACTA is governed by a seven-member board, which is comprised of two members from each Port, one each from the Cities of Los Angeles and Long Beach and one from the Metropolitan Transportation Authority. If in the future, ACTA is able to distribute income or make equity distributions, the Ports shall share such income and equity distributions equally.
7. Obtain from the external auditor the written disclosures and a letter required by the PCAOB regarding the external auditor’s communications with the Committee concerning independence and relationships between the external auditor and the Company; obtain confirmation that in the registered independent public accounting firm’s judgment, they are independent of the Company within the meaning of the federal securities laws; actively engage in a dialogue with the registered independent public accounting firm any disclosed relationships or services that may impact their objectivity and independence; and take appropriate actions to oversee the independence of the external auditor.
“Very high”, four for “Moderate High, three for “Neutral”, two for “Fairly Low” and one for “Very low”. These questions are adopted from a research of Institute of Internal Auditors Malaysia (2008).
Internal audit contribution to risk management is measured in section C of the questionnaire which consists of questions relating to risk assessment, risk management, and risk communication. In terms of measuring internal audit contribution in control, there are relatively include with the control of effectiveness, control adequacy and alignment of control and organisational objectives which were included in section C of the questionnaire. As governance is wide, therefore there are more dimensions which internal audit can contribute such as board related, communication and reporting, ethic related, governance related and management related. For each category of contribution, an average score across the items will be calculated.
(h) to consider major investigation findings on risk management and internal control matters as delegated by the Board or on its own initiative and management’s response to these findings;
(i) where an internal audit function exists, to ensure co-ordination between the internal and external auditors, and to ensure that the internal audit function is adequately resourced and has appropriate standing within the Group, and to review and monitor its effectiveness;
research study. The multiple liner regression analysis is done as the underlying statistical test on the response variables, ROA, ROE and TQ to test the association between the explanatory variables (board size, board independence, size of auditcommittee and auditcommittee composition) with firm performance. The empirical findings of the study state that board independence ratio and auditcommittee is statistically significant and has positive impact on ROA and TQ. In the case of firm performance measure ROE, none of the explanatory variables considered in this research is statistically significant but has positive direction individually on ROE. Noticeably, board size is statistically insignificant and has negative correlation with ROA and TQ and small margin of positive correlation with ROE. It suggests that larger the board size, lesser the firm performance. Because, organizations having larger boards may face less effective control mechanisms due to weaker communication and indecisiveness of larger groups. The study is not beyond limitations. The study is conducted using a only four corporate governance variables and detruncating some other control mechanisms like ownership structure, board skills and management skills due to lack of availability of data. There is a scope of further research to explore the impact of corporate governance mechanisms in the contest of diverse social and environmental agency issues and their market valuations.
d. whether there are any other matters that should be discussed with the Committee that have not been raised or covered elsewhere.
7. The Committee shall receive a confidential assessment of the competence of the Company’s financial and accounting personnel and any relevant recommendations made by the external auditors. The Committee shall resolve any disagreements between the external auditors and management regarding financial reporting.
25. Audit Partner Rotation. To monitor the rotation of the partners of the Auditors on the Company’s audit engagement team as required by applicable laws and rules.
26. Auditor Independence. At least annually, to receive and review written disclosures from the Auditors delineating all relationships between the Auditors and the Company as well as a letter from the Auditors affirming their independence, consistent with Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, of the Public Company Accounting Oversight Board (United States) (including any successor rule), to consider and discuss with the Auditors any disclosed relationships and any compensation or services that could affect the Auditors’ objectivity and independence, and to assess and otherwise take appropriate action to oversee the independence of the Auditors.
Statement of Policy
Primary responsibility for the Corporation's financial reporting and internal controls is vested in the management of the Corporation, as overseen by the Board of Directors. The AuditCommittee shall provide assistance to the Board of Directors in fulfilling their responsibility to the shareholders, potential shareholders and the investing community relating to corporate accounting, reporting practices, and the quality and integrity of the financial reports of the Corporation. In so doing, it is the responsibility of the AuditCommittee to maintain free and open means of communication between the Board of Directors, the independent auditors, the internal auditors and the financial management of the Corporation. The AuditCommittee shall provide oversight and review of the Corporation's accounting and financial services, internal operating controls and its ethical standards in consultation with the independent auditors and the General Counsel of the Corporation.
• At least annually, obtain and review a report from the external auditor regarding the firm’s quality control procedures, any material issues raised by the most recent internal quality control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more of the independent audits carried out by the firm, and any steps taken to deal with any such issues, and all relationships between the external auditor and the Company.
• The committee shall review all material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.
• The committee shall review with management and the independent auditors the Company’s annual financial statements and related footnotes, the independent auditors’ audit of the financial statements and their report thereon, the independent auditors’ judgments about the quality, not just the acceptability, of the Company’s accounting principles as applied in its financial reporting, any significant changes required in the independent auditors’ audit plan, any audit problems or difficulties or disputes with management encountered during the audit and management’s
The objectives of our test work were to: (1) ascertain the physical existence of inventoried items; (2) assess the reasonableness of
inventory balances reported by management; and (3) provide reasonable assurance as to the system of internal controls over the physical inventory process. Major procedures performed by Audit included observing the physical inventory counts, conducting test counts, and performing various analyses between the current year and the prior year inventory figures.
Exhibit 4 – Wider Scope Significant Risks 1. Financial sustainability
In line with Scottish Funding Council Guidance the College has prepared a long term financial plan which identified a pattern of recurring deficits from 2018/19 to 2021/22. The long term financial plan was presented to the Board in August 2017 and the assumptions were subject to challenge and scrutiny. The College recognise the significant challenge going forward. Staffing costs are a significant proportion of the overall operating expenditure and are predicted to rise to 60% of expenses. The impact of national bargaining and the removal of the public sector pay cap will have a significant impact on the College’s ability to deliver a balanced budget.