How Should an Audit Committee Evaluate its Own Effectiveness?

We believe that an audit committee should conduct an annual assessment of its own effectiveness. There are a number of ways to conduct this self-assessment. We recommend that audit committee members complete a questionnaire such as the Audit Committee Self-Assessment practice aid we have provided within the Appendix. The topics and issues for consideration within this questionnaire have been developed in conjunction with this publication, review of other widely available self-assessment tools and our knowledge and experience in working with nonprofit organizations.

As there is always room for improving quality and performance, we recommend that the Audit Committee Self-Assessment practice aid be used in conjunction with your organization’s Audit Committee Charter (or similar document) to ensure that governance responsibilities are adequately aligned with the charter and are being fulfilled appropriately. You may choose to customize this self-assessment further to reflect specific attributes of your organization and develop specific action steps and estimated completion dates to enhance your committee’s performance.

Additionally, the AICPA Audit Committee Toolkit contains a sample questionnaire accessible from the AICPA’s Audit Committee Effectiveness Center.¹

In addition to using the Audit Committee Self-Assessment practice aid, audit committee members may consider further performing evaluations of each other (with or without assistance from third-party consultants) and seek specific feedback from members of management, the external auditors and the internal auditors. Honest self-assessments may uncover the need for a change in the composition of committee members to meet the strategic needs of the organization.

As mentioned previously, the audit committee charter should be viewed and used as a working/living document. Thus, as part of the audit committee’s assessment of itself, the audit committee charter should also be updated, as necessary.

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(1) The AICPA’s Audit Committee Effectiveness website has numerous resources available for purchase, including its Audit Committee Toolkit for nonprofit organizations.