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QCA Updates Audit Committee Guide8th October 2019 Corporate
The Quoted Companies Alliance (“QCA”) is an independent membership organisation which champions the interests of small and mid-sized quoted companies. Many AIM Listed companies have adopted its Corporate Governance Code (the “QCA Code”) in order to comply with the requirement under AIM Rule 26 that they follow and report on a recognised corporate governance code. It is also increasingly common for standard list Main Market companies to voluntarily adopt that code.
Under the QCA Code, the audit committee is intended to provide confidence to shareholders on the integrity of a company’s financial accounts and challenge both management and external auditors in relation to the annual report and accounts and other relevant announcements. It is also often responsible for (amongst other things) oversight of risk management and internal control systems. To support the obligations of a member companies with respect to the audit committee, the QCA publishes a guide to its work which it has recently updated.
The new guide expands on and replaces the version published in 2014. While the overall structure of the guide is substantially the same, key changes include:
- The guidance on the roles of the finance director, company secretary, audit committee and chairman of the committee has been expanded, and it has been made clear that the company secretary should not normally either be on the audit committee or have a dual role as finance director.
- Substantial changes have been made to the risk management and internal control section. The revised section focuses on the need for audit committees to ensure they have a clear understanding of the opportunities and threats facing the company, as well as the impact they may have on it and how they are monitored. Those risks and their possible effect on the business should be considered at every meeting of the audit committee. In addition the sections relating to the prevention of bribery and corruption have been removed and the whistleblowing section cut back.
- New guidance around tendering has been included in the section relating to auditors.
- Additional guidance on audit opinions, dividends and accounting policies has been added to the annual cycle section.
- Further information to be set out in the audit committee report has been included in the relevant section. This is primarily to reflect the changes above.
- Some new items have been added to the example agenda for the committee meeting for month six of the financial year.
In our compliance driven world proper process is becoming increasingly important, but generally we find the QCA’s recommendations provide a good balance of compliance and the needs of the business in the small-cap listed world. The changes to the QCA’s audit committee guide brings its recommendations up to date while maintaining that balance.
This article is for general guidance only and should not be used for any other purpose. It does not constitute and should not be relied upon as legal advice.