Audit committees play a critical role in contributing to the quality of statutory audits and in ensuring the integrity of the financial reporting process.
High-performing audit committees provide confidence to market participants, who rely on financial reporting as they make investment decisions. In 2014, the European Union (EU) enacted a new Audit Regulation and a related Audit Directive—collectively referred to as the ARD—which became effective in 2016, expanding the role and mandatory responsibilities of audit committees.
Shareholders, regulators, and other stakeholders of Europe’s publicly listed companies are increasingly focused on the role and performance of audit committees. The European Union’s 2014 Audit Regulation and Directive (ARD) has several provisions affecting audit committees. Recent financial scandals have further heightened public attention to audit committees and audit quality. Nonetheless, because most of an audit committee’s work is done in a confidential setting, many stakeholders are poorly informed about what audit committees do.