What does an audit committee actually do — and how is its role different from the board's and the external auditor's?

An audit committee is typically made up of non-executive board members, most of whom must be independent — a core requirement for public joint-stock companies listed under the corporate governance code issued by the Securities and Commodities Authority. The idea is that the committee takes on part of the board's financial-oversight responsibility and digs into it more deeply than the full board can during its regular meetings.

The committee's core role is reviewing the quality of financial reporting before it gets approved — making sure the accounting policies used are reasonable, and that significant estimates or judgements (such as bad debt provisions or asset impairment) have been discussed adequately with executive management. The committee also oversees the internal audit function where one exists, and reviews internal control and risk management systems.

Regarding the external auditor, the committee is the one that follows the selection process and assesses the auditor's independence, and discusses the scope and results of the annual audit with them before that goes to the full board — but it does not issue the audit opinion itself; that remains solely the independent external auditor's job. In other words, the committee monitors the quality of the relationship and the process, without stepping into the technical opinion itself.

The core distinction: the board makes strategic decisions for the company as a whole, the external auditor gives an independent opinion on the financial statements, and the audit committee is the bridge that makes sure the reports reaching the board and shareholders are actually accurate and reliable before anyone builds a decision on them. RASEEKH helps companies and groups set up this structure and the reporting the committee needs to do its job properly.