Audit committees play a key role in providing departmental management with independent and objective advice on matters including financial reporting, risk management and internal and external audit. This audit reviewed the governance arrangements for audit committees in all seven state government departments and Victoria Police.
This audit found that the governance arrangements for audit committees are generally effective, however, there are key areas for improvement. These areas include the need for agencies to ensure that their committee maintains the required mix of skills, and for agencies to regularly and comprehensively assess the performance of individual members and effectiveness of their audit committee as a whole. The Standing Directions of the Minister for Finance were recently reviewed and these changes make addressing these gaps even more important.
Other changes to the Standing Directions reduce the obligations on audit committees. In particular, the changes limit the management actions that audit committees are now required to monitor, and abolish the requirement for committees to review whether underlying issues identified by internal and external audit have been effectively resolved. This is a backward step that could lead to the failure of agencies to address important issues and risks.
The recommendations in this audit are designed to improve gaps in the governance arrangements for audit committees and to ensure committees are fully effective in light of the recent changes to legislative requirements.