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4 Benefits of a Government Audit Committee

Apr 4, 2019

Outside of accounting circles, “audit” isn’t anyone’s favorite word. “Government” may not be on many people’s Top 10 list either. But a “government audit committee” (even though it has a certain bureaucratic ring to it), is actually a good idea for a number of reasons.

In a nutshell, a government audit committee helps governments at all levels (local, state, and federal) operate at higher levels of efficiency – enhancing transparency, increasing accountability, and improving controls. An audit committee helps focus and document the government’s process of managing the audit, the performance of the auditor, and the responses of management.

Successfully implemented in the private sector for many years, we think it’s a best practice that should be applied to government entities. An independent and functionally responsive audit committee delivers a level of financial reporting oversight that serves citizens and elected officials alike.

Four Key Benefits of a Government Audit Committee Are:

  1. Improve financial practices and reporting. An audit committee can be instrumental in reviewing, monitoring and directing activities and results related to the maintenance of internal controls and preparation of financial reports. The committee helps facilitate communication between the government’s management, the auditor and the governing board.
  2. Help prevent fraud. A diligent audit committee will take an active role in the prevention and detection of fraud and encourage the establishment of effective ethics and compliance programs. The committee should establish and monitor the government’s code of ethics or code of conduct and, institute and monitor special investigations.
  3. Develop the internal audit function.  With an audit committee in place, the government’s internal audit team can work hand-in-hand with the audit committee to ensure the government is taking appropriate actions to meets its financial and compliance responsibilities. The audit committee reviews the scope, qualifications and activities of the internal audit function and ensures that appropriate actions are taken with regard to any findings noted by the internal audit staff.
  4. Enhance the external audit function. An audit committee oversees and monitors the performance of the external auditor and helps ensure independence is maintained between the external auditor and those involved in managing the government’s affairs. The committee should also participate in the external auditor selection process and make recommendations to the governing board.

Government Audit Committee Keys to Success Include:

  • Be well-rounded: audit committee members should collectively possess technical accounting, auditing, and financial management expertise.
  • For maximum independence, most members should be appointed from outside the government.
  • Members should be provided adequate education and training.
  • Audit committee member terms should be longer than one year and staggered to provide continuity.
  • The committee should meet on a regular and frequent (more than once a year) basis.

CRI is well-versed in all the details and nuances of governmental auditing, with governmental clients including municipalities, cities, counties, boards of education, utility boards, and transportation agencies. It’s the kind of experience few firms can match. And as governmental accounting and auditing continues to evolve, we’re committed to staying at the top of our game. Our membership in the AICPA’s Governmental Audit Quality Center ensures our adherence to best industry practices.

Want to establish an audit committee for your government entity? “Elect” CRI!

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