Audit committees' communication on internal audit to boards of directors

Abstract

Audit committees are expected to communicate effectively as trusted relationships are created when high quality communication takes place. Very little research has been performed on communication between audit committees and boards of directors and no studies have been performed on audit committees’ communication of internal audit information to boards of directors. In closing the gap this article examines the effectiveness of the process of communicating internal audit information between the audit committee and the board, and is useful as previous audit committee studies focussed predominantly on the diligence, resources, authority, and composition of the audit committee and not on the actual process of communication. A case study of three JSE listed mining companies operating in the South African gold, platinum, coal and energy sectors was performed to understand whether communication processes between their audit committees and boards of directors were effective. This involved understanding the views of the chairpersons of the audit committee and board, non-executive directors and chief audit executives for the three companies concerned, because these parties are important role players in communicating internal audit information between their corresponding committees. The findings of the study identified strengths and weaknesses of internal audit information to be communicated and considered the communication process. Barriers, such as board dynamics, culture and language, and the conduct of members were identified. The study showed the importance of the role of the chairperson of the audit committee to promote effective communication and to fulfil such a role, identified attributes are needed.