The existence of an independent audit committee is recognized internationally as an important feature of good corporate governance. The Audit, Governance and Risk Management Committee of the Judicial Service Commission (JSC) was established on 4th June, 2014. The formation of the Audit, Governance and Risk Management Committee is consistent with Section 73(5) of the Public Finance Management (PFM Act), 2012 and Regulation 174 of the Public Finance Management (National Government) Regulations, 2015 which require every national government entity to establish an audit committee whose composition and functions shall be as prescribed by the regulations.
The Audit Committee Guidelines for the National Government entities issued through Gazette Notice No. 2691 on 15th April, 2016 provides that the Audit Committee of the Judiciary should be constituted as follows:
a) Comprise of at least three (3) members of the JSC none of whom shall have executive role.
b) The JSC shall appoint the chair of the committee.
c) The National Treasury representative in the JSC shall be part of the 3 members.
There is no National Treasury representative in the JSC. The Ag. Director, Audit and Risk Management serves as the Secretary of the Committee by virtue of the provisions of the Audit Committee’s Charter and Audit Committee Guidelines issued through Gazette Notice No. 2691 on 15th April, 2016.
Responsibilities of the JSC Audit, Governance and Risk Management Committee
The purpose of the Audit, Governance and Risk Management Committee is to assist the Commission in fulfilling its oversight responsibilities by reviewing, identifying, assessing, monitoring and managing risks and to ensure good governance generally. The Committee shall oversee report and make recommendations to the Commission in respect of financial and non-financial risks faced by the Judiciary. The specific terms of reference of the Committee are as follows:
- Publicly Disclosed Financial Information
The Committee shall review and recommend for approval by the Commission before release to the public:
a) Interim unaudited financial statements;
b) Audited annual financial statements, in conjunction with the report of the external auditors;
c) All public disclosure documents containing audited or unaudited financial information, including any prospectus, the annual information form and management’s discussion and analysis of financial condition and results of operations, as well as related press releases, including earnings guidance; and
d) The compliance of management certification of financial reports with applicable legislation and attestation of the Company’s disclosure controls and procedures.
- Financial Reporting and Accounting Trends
The Committee shall:
i. Review and assess the effectiveness of accounting policies and practices concerning financial reporting;
ii. Review with management and with the external auditors any proposed changes in major accounting policies, the presentation and impact of significant risks and uncertainties, and key estimates and judgments of management that may be material to financial reporting;
iii. Question management and the external auditors regarding significant financial reporting issues discussed and the method of resolution; and
iv. Review general accounting trends and issues of accounting policy, standards and practices which affect or may affect the Commission.
- Internal Controls
i)The Committee shall review and monitor the internal control procedures, programs and policies, and assess the adequacy and effectiveness of internal controls over the accounting and financial reporting systems, with particular emphasis on controls over computerized systems.
ii. The Committee shall review:
a) The evaluation of internal controls by the external auditors, together with management’s response;
b) The review and approval of the Commission’s hiring policies regarding employees and former employees of the external auditor;
c) Any decisions related to the need for internal auditing; and
d) Internal control procedures to ensure compliance with the law and avoidance of conflicts of interest.
iii. The Committee shall undertake private discussions with staff of the internal audit function to establish internal audit independence, the level of co-operation received from management, the degree of interaction with the external auditors, and any unresolved material differences of opinion or disputes.
- Internal Audit
The Committee shall:
i. Review the mandate and annual objectives of the internal auditor, if the appointment of an internal auditor is deemed appropriate;
ii. Review the adequacy of the Company’s internal audit resources; and
iii. Ensure the internal auditor has ongoing access to the Chair of the Committee as well as all officers of the Commission, particularly the Chief Executive Officer.
iv. Review the audit plans, performance and summaries of the reports of the internal audit function as well as management’s response including follow-up to any identified weakness.
v. Reviewing the internal and external audit findings and recommendations and proposing corrective and preventive action where necessary.
- External Audit
The Committee shall:
i. Receive periodic reports from the external auditors regarding the auditors independence, periodic review of the auditors’ quality control procedures, material issues arising from the periodic quality control review and the steps taken by the auditors to address such findings.
ii. Take appropriate steps to assure itself that the external auditors are satisfied with the quality of the Commission’s accounting principles and that the accounting estimates and judgments made by management reflect an appropriate application of generally accepted accounting principles.
iii. Undertake private discussions on a regular basis with the external auditors to review, among other matters, the quality of financial personnel, the level of co-operation received from management, any unresolved material differences of opinion or disputes with management regarding financial reporting and the effectiveness of the work of the internal audit function.
iv. Reviewing external audit findings and recommendations and proposing corrective and preventive action where necessary
- Audit Procedures
The Committee shall review:
i. The audit plans of the internal and external audits, including the degree of co-ordination in those plans, and shall inquire as to the extent to which the planned audit scope can be relied upon to detect weaknesses in internal control or fraud or other illegal acts. The audit plans should be reviewed with the external auditors and with management and the Committee should recommend to the Commission of Directors the scope of the external audit as stated in the audit plan.
ii. Any problems experienced by the external auditors in performing the audit, including any restrictions imposed by management or significant accounting issues on which there was a disagreement with management.
iii. Post-audit or management letter containing the recommendations of the external auditors, and management’s response and subsequent follow-up to any identified weakness.
- Corporate Governance
The Committee shall
i. Develop and recommend to the Commission a set of corporate governance principles.
ii. Reviewing and approving the audit charter where applicable and the internal audit annual work plans.
iii. Oversee the evaluation of the Commissions of Directors and senior management.
iv. Establish, monitor and recommend the purpose, structure and operations of the various committees of the Commission, the qualifications and criteria for membership on each committee of the Commission and, as circumstances dictate, make any recommendations regarding periodic rotation of Commissioners among the committees and impose any term limitations of service on any Committee.
- Risk Management and Other Responsibilities
The Committee shall:
i) Put in place procedures to receive and handle complaints or concerns received by the Commission about accounting or audit matters including the anonymous submission by employees of concerns respecting accounting or auditing matters.
ii. Evaluate the adequacy of management procedures with regard to issues relating to risk management, control and governance and in particular with respect to input risk, process risk and output risk.
iii. Review such litigation, claims, transactions or other contingencies as the internal auditor, external auditors or any officer of the Commission may bring to its attention, and shall periodically review the Commission’s risk management programs. In that regard the Committee shall review the Commission’s major risk exposures and the steps taken by management to monitor, control and report such exposures.
iv. Review assurances of compliance with covenants in trust deeds or loan agreements.
v. Review business risks that could affect the ability of the Commission to achieve its business plan.
vi. Review the risk identification and management process developed by management to confirm it is consistent with the Judiciary’s strategy and business plan;
vii. review management’s assessment of risk at least annually and provide an update to the Commission in this regard;
viii. Inquire of management and the independent auditor about significant business, political, financial and control risks or exposure to such risk;
ix. Oversee and monitor management’s documentation of the material risks that the Judiciary faces and update as events change and risks shift;
x. Assess the steps management has implemented to manage and mitigate identifiable risk, including the use of hedging and insurance;
xi. Oversee and monitor management’s review, at least annually, and more frequently if necessary, of the Judiciary’s policies for risk assessment and risk management (the identification, monitoring, and mitigation of risks); and
xii. Review the following with management, with the objective of obtaining reasonable assurance that financial risk is being effectively managed and controlled:
a)Management’s tolerance for financial risks;
b) Management’s assessment of significant financial risks facing the Judiciary; and
c) The policies, plans, processes and any proposed changes to those policies for controlling significant financial risks.
xiii. Review legal matters which could have a material impact on financial statements.
xiv. Review uncertainties, commitments, and contingent liabilities material to financial reporting.
xv. Review the effectiveness of control and control systems utilized by the Commission in connection with financial reporting and other identified business risks.
xvi. Review incidents of fraud, illegal acts, conflicts of interest and related-party transactions.
xvii. Review material valuation issues.
xviii. Review the quality and accuracy of computerized accounting systems, the adequacy of the protections against damage and disruption, and security of confidential information through information systems reporting.
xix. Review cases where management has sought accounting advice on a specific issue from an accounting firm.
xx. Review any legal matters that could have a significant impact on the financial statements.
xxi. Consider other matters of a financial nature it feels are important to its mandate or as directed by the Commission.
The Committee shall report regularly to the Commission on its proceedings, reviews undertaken and any associated recommendations. The Committee shall have the right, for the purpose of discharging its powers and responsibilities and to inspect any relevant records of the Commission.