When Should the Audit Committee Meet with Management, Internal Audit and the Independent Auditors?

We recommend that audit committees establish a timeline for essential meetings, yet be flexible and willing to meet more frequently as circumstances warrant or as issues arise. At a minimum, we recommend that the audit committee, together with management and the independent auditors, meet at least two to three times per year: at the start of the annual audit; and at the end of the audit to discuss its results. In addition, audit committees should meet formally with internal auditors at least twice a year – once to discuss the internal audit plan, and once to discuss the results of the internal audit work. The audit committee is encouraged to hold executive sessions with the auditors, without management present, as often as deemed necessary. We further encourage more frequent contact between meetings between the audit committee and relevant parties, as circumstances warrant.

Who is required to attend and the frequency and duration of such meetings should be adjusted on an as-needed basis to address risks and complexities faced by the organization. Ample time should be reserved during the meetings so that the audit committee may speak freely and candidly with each of these parties and plan for executive or separate sessions (see following discussion) in which the audit committee may speak directly to these individual groups without the others present. To underscore the importance of the initial planning meeting in setting the tone and understanding with the auditors, the planning meeting typically would address the following items:

• Auditors’ proposed audit plan and scope, including areas identified as key risk areas
• Expectations of the audit committee as to areas of focus or procedures it would like to have the auditors address
• Expectations of what kind of items, in addition to those required, that the audit committee would like to have the auditors communicate back to them
• A timeline for meetings, deliverables and other communications
• Agreement as to the format of items to be reported to the audit committee (e.g., verbal, written or both)

It should be noted that the resulting audit plan and scope that are developed at the planning phase are not static, and changes to this plan as a result of circumstances (either anticipated or otherwise) may dictate the need for additional meetings with the external auditors. The same risk management concept holds true for sessions with management and the internal auditors (see following section). These planning meetings, thus, serve as a good reference/check to refer to in future meetings to ensure that the risks identified either prior to the audit or as the year progresses are being addressed in a timely manner and that the audit is tracking according to plan, and findings are being handled in a timely fashion to reduce the likelihood that “surprises” are uncovered in the wrap-up phase of the reporting period. As a further point, if regularly scheduled meetings do not cover the results of auditors’ “management letter,” we recommend that an additional meeting be scheduled to encompass noted areas for improvement. Please refer to the Appendix for a sample of BDO’s Model Audit Committee Meeting Agendas which provides a recommended timeline for various meetings including objectives, action planning and reporting to the board of directors.

Now, let’s turn to the HOWs of an effective audit committee.

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