Audit committees have a valuable contribution to make in improving the governance, and so the performance and accountability, of public entities. They can play an important role in examining an organisation’s policies, processes, systems, and controls. An effective audit committee shows that an organisation is committed to a culture of openness and continuous improvement.

An audit committee does not displace or change proper accountability arrangements. Accountability for good governance rests with the public entity’s governing body or, in a government department, the chief executive.

In public entities with a governing body (for example, State-owned enterprises, Crown entities, and local authorities), an audit committee helps the governing body to carry out its governance duties. In government departments, an audit committee provides the chief executive with independent advice on strategic, performance, assurance, and/or compliance matters.

Effective audit committees can provide objective advice and insights into the public entity’s strategic and organisational risk management framework. In doing so, they can identify potential improvements to governance, risk management, and control practices.

I expect all public entities to consider setting up an audit committee in line with the good practices identified in this publication. If a public entity decides not to form an audit committee, then I expect appropriate systems and processes to be in place to support the governing body or the chief executive to carry out their accountability and governance responsibilities.

I thank the chief executives, audit committee chairpersons, and internal audit managers from government departments, local authorities, Crown entities, tertiary institutions, district health boards, and State-owned enterprises who shared their experiences of audit committees with us. I would also like to thank the Australian National Audit Office for allowing us to use extracts from their publication Better Practice: Audit Committees in the Public Sector, and Deloitte for their help in preparing this guide.

K B Brady
Controller and Auditor-General

26 March 2008