The Financial Reporting Council's new draft code for audit committees, published today, states that at least one members of the committee should have 'significant' recent and relevant financial experience.
The new draft code of guidance further says an audit committee should have a minimum of three members, which all should receive suitable training.
Sir Robert Smith, chairman of The Weir Group, who chaired the FRC audit committee group, said the code ‘will strengthen the hand of audit committees without breaking the unitary board structure’.
The code says audit committees should monitor financial statements, review the internal control system and internal audit function. It should make recommendation about external audit appointments and review its independence and non-audit work.
It also rules that the board of directors should provide the audit committee with sufficient resources to perform its task, even if this involves getting independent advice.
Smith denied reports that the code could give the audit committee an adversary role in general. But in specific situations, he admitted it could find itself between a rock and a hard place.
‘If something serious is going on, the audit committee needs to follow through to the end. That could lead to an adversary position,’ he said.
The FRC has set a consultation period on 12 weeks, before it will finalise the code on 14 April. Companies should implement the code by 1 July this year.