Fundamental and Leading Practices in Audit Committee Oversight of External Audit

This boardroom tool from the Report of the NACD Blue Ribbon Commission on the Audit Committee is a concise checklist of oversight activities for one of the committee's most critical roles: oversight of the external auditor.

Considerations in the Appointment of the External Auditor

• Background and experience of principal members of the engagement team, including the lead engagement partner, tax partner, quality control review partner, senior manager(s), and any specialists (such as actuarial, valuation, and employee benefits specialists) who perform a significant role in connection with the audit.
• Audit firm’s technology used in the audit, and expectations regarding the use of the work of the company’s internal auditors and other third parties—and how this will impact the external auditor’s work and fees.
• Audit firm’s quality control system and how it is managed to provide reasonable assurance regarding consistent audit quality throughout the firm.
• Audit firm’s other clients—as an indication of the audit firm’s industry experience (including non-audit services), experience with companies of similar size, as well as the audit firm’s footprint of operations domestically and internationally.
• If the company has significant international operations, the extent and quality of audit resources outside the U.S. that will be used by the audit firm, and whether the international resources are subject to the same audit approach and quality control standards as the audit firm.