Governance Role of Audit Committees

Question: Discuss about the Governance Role of Audit Committees. Answer: Introduction: In the present case, as Katrina Ng is manager as well as member of Board of Directors of not for profit entity. There has been no violation of the Accountant code of ethics if she is only director and not independent director. If she is an independent director that she has violated the principal of Objectivity, even though the position is honorary and does not involve her to perform in management capacity of the organization. It might be possible that the decisions taken by Katrina Ng in her managerial capacity in the influence of senior management might also affect decisions when taken as a director. A public accountant can provide tax and management services and also conduct audit but cannot provide book keeping services to the same client. As audit involves methodical examination and testing of financial records of a company, hence it is not possible for one to judge books of accounts which are prepared by him only (Nicol?escu, 2013). The same will violate principal of integrity and objectivity. In present case chances are probable that Peter Beattie might be biased while providing an opinion on the books of accounts prepared by him. The auditor should provide Unqualified Opinion. As per Miller and Skinner (2015), unqualified opinion is expressed by an auditor in case where no reservation regarding the financial statements is observed while auditing. It is also known as clean opinion which refers that financial statements provide true and fair view. In the present case as the auditor is unable to obtain confirmation regarding the balances from the three clients who were major customers. As the auditor is able to satisfy himself using other procedures regarding the validity of their balance; he should provide unqualified opinion. No particular method is necessary for assessing the validity of method; it is necessary that auditor must be sure that the accounts are presented in fair manner. Disclaimer Opinion should be expressed by the auditor in this case as the client has held the auditor to not observing the account of plant, property and equipment. The extent of materiality which existed in this account was 20%. According to Ghafran and O'Sullivan (2013), disclaimer opinion is issued by the auditor in cases where the auditor is restricted to examine some or the other accounts which are material and the auditor is not able to express opinion. In cases where the auditor is not able to find appropriate evidences which may assist them is expressing that whether or not the statements are in accordance with the financial accounting standards. Hence, the auditor is not able to lay down any type of opinion regarding the financial statements of the company owing to the limitation of restriction put by the client. A disclaimer opinion stays in effect till the client doesnt give appropriate evidences to the auditor to withdraw such an opinion (CPAs vs. NON-CPAs. John W. Day. 2 016). References Ghafran, C. and O'Sullivan, N. 2013. The governance role of audit committees: reviewing a decade of evidence.International Journal of Management Reviews.15(4). Pp381-407. Miller, G. S. and Skinner, D. J. 2015. The evolving disclosure landscape: How changes in technology, the media, and capital markets are affecting disclosure.Journal of Accounting Research.53(2). Pp221-239. Nicol?escu, E. 2013. Developments in corporate governance and regulatory interest in protecting audit quality.Economics, Management, and Financial Markets. (2). Pp198-203. CPAs vs. NON-CPAs. John W. Day. 2016. [Online]. Available through www.reallifeaccounting.com [Accessed on 29th January 2017].