Audit Committee Questionnaire Auditor Effectiveness

A. Best Practices for Audit Committees Auditor Effectiveness Self Assessment HIGHLY EFFECTIVE AUDITORS The foundation of an auditor's effectiveness with an audit committee is an objective, yet constructive mindset and requires a very strong understanding of the company, industry, and business and related culture, risks and strategies. The audit team should act as the "eyes and ears" of the committee. Additional critical success factors of highly effective auditors include:
(Rating Scale: 1 = outstanding; 2 = solid; 3 = needs attention; 4 = very poor)

Relationships A strong mutual relationship of trust and confidence within the committee and management, while maintaining an independence of mind and appearance (i.e., healthy skepticism). Recognition by the auditor that the board of directors/audit committee is the client. (Insert Rating) Knowledge of the Audience A strong knowledge of the committee dynamics, relationships and operating style. (Insert Rating) Expectations Committee expectations of auditors proactively sought and clearly understood by auditors and considered in all work performed and in all communications. Involvement with management and the committee in planning committee activities and meeting agendas. (Insert Rating) Issue Management Effective anticipation of issues with timely response and full, candid discussion; first with management and then, as necessary, with the committee. Avoidance of surprises and immediate crises. (Insert Rating) Communications Carefully planned and focused presentations and dialogue with the committee. "Seamless" professional coordination with other internal/external auditors and with management. Consistent focus only on relevant matters responsive to committee charter, risks and expectations. Candid, unvarnished commentary on qualitative aspects of financial reporting, controls, people, and the basis for auditor conclusions on difficult judgments and other important matters. (Insert Rating) Performance Assessment Self assessment and inquiry of management and committee against established expectations. (Insert Rating)

KEY AUDITOR BEST PRACTICES Relationships Audit team leader meet annually, outside the normal meeting environment, with audit committee chairman to review committee expectations and charter and provide input on committee annual plan. Encourage joint involvement of management and internal and external auditors. (Insert Rating) Maintain regular contact with chairman throughout the year to communicate and to build trust and confidence. Coordinate with management in keeping committee current on relevant new financial/control topics. (Insert Rating) Selectively include advisory personnel (tax, industry or other experts, concurring partner and/or advisory partner) or other key persons in committee meetings, but only when there is a clear purpose and role. (Insert Rating) Understand and respect the position of management. Specifically:

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Audit Committee Questionnaire Auditor Effectiveness

Assure that management is not surprised by auditor comments to the committee. Anticipate and respond to business and financial risks and potential risks in a timely manner. Encourage management use of a formal risk management process to focus management, auditor and audit committee attention. Thoroughly discuss any disagreements with management in advance of committee meetings. Advise management specifically how these will be handled with the committee and why. (Insert Rating)

Communications Listen well, think straight, talk straight; allow significant meeting time for dialogue and questions. (Insert Rating) Meet (or at least talk) with the audit committee chairman and management in advance of each committee meeting; agree on pre-read materials, meeting format and time allocation. (Insert Rating) Focus meeting discussions on (1) key risk areas and related risk controls; (2) explanations of the basis for auditor conclusions on significant financial statement matters (i.e., judgments and estimates); (3) qualitative assessments of accounting/reporting practices and peer comparisons; and (4) responses to questions on pre-read materials. (Insert Rating) Distribute relevant pre-read materials in advance, generally as stand-alone information for the committee. (Insert Rating) Respond directly to committee questions. Get to the point quickly, be decisive and take a position. (Insert Rating)

B. Internal Audit Department Interviewee: _____________________________________________________________ Position: ________________________________________________________________ Interviewer: ______________________________________________________________ Interview date: __________ Additional comments regarding interview: ____________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Answers represent thoughts of the interviewee. Inform interviewee that information is confidential, if applicable. 1. How long have you been on the audit committee? How did you get involved? 2. What do you feel is your role as a committee member? 3. What is the companys process for monitoring and controlling business risks?

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Audit Committee Questionnaire Auditor Effectiveness

4. How often does the audit committee review the internal audit department charter to see if it is consistent with their expectations or changing conditions in the organization? 5. What is your understanding of the role of the internal audit department? 6. What should their role be? 7. What are the committees expectations for internal auditing? How are these communicated? 8. Do you feel the work and scope of the current internal audit function is sufficient? If not, what should be changed? 9. Describe the relationship you and the other members of the audit committee have with the internal audit director. Is there any interaction outside of the regularly scheduled committee meetings? 10. Describe your impression of the relationship of the internal audit director with executive management. Is the director considered an integral part of the management team? 11. Does the internal audit department get involved with areas beyond traditional internal controls (e.g., process improvement and consulting on operating problems/issues)? Should they? 12. How does the audit committee get involved in annual planning/budgeting for the internal audit department? Are the business risks considered important by the committee being covered? 13. What areas would you like to see covered by the internal audit department that are not currently covered?

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