engleski

The Role of Audit Committee in the Enterprise Risk Management

Globalization of labour and capital markets and also development and increased use of information technology, as well as the increasing complexity of business transactions influenced the emergence of new and complex risks that companies face every day. In parallel with the growing complexity of risks the expectations for their effective management are also rising. Risk management or defining strategies to deal with risks the company is exposed to become a necessary condition and prerequisite for the achievement of company objectives. One of the most important factors that influence the efficiency and effectiveness of the risk management process is the establishment of appropriate oversight of the process itself. Although the monitoring of the risk management process is the responsibility of the Board, recently, it has been delegated to the Audit Committee and thereby its role is becoming more important and the scope of its responsibilities and tasks is expanding. Regardless of whether is it the continental system of corporate governance, which is characterized by a two tier governance structure (with Supervisory and Management Board) or the Anglo-American system of corporate governance in which the role of the management and Supervisory Board integrates into a single Board of Directors with executive and non-executive directors, the Audit Committee is a specialized sub-committee which is being delegated with appropriate supervisory functions. The primary functions of the Audit Committee are usually associated with the internal controls and risk management, financial reporting, compliance with legal and regulatory requirements and the relevant issues related to the process of external and internal audit. This chapter discusses the relevant features of Audit Committees in the system of corporate governance with particular emphasis on the role of Audit Committees in the risk management process. The main research objective is to analyze the role and responsibilities of the Audit Committee in enterprise risk management and relevant aspects of cooperation with other participants in the process, primarily with internal auditors, exploring at the same time their significance. This chapter summarises the current understanding of the Audit Committee role in the enterprise risk management by analyzing previously published research. Research findings show that the new rules extend the duties and responsibilities of the Audit Committee on risk management. Expertise and information awareness of the Audit Committee is imposed as a necessary prerequisite of their effective functioning in this area, but the main drawback that they are attributed. In order to effectively discharge their responsibilities, Audit Committees should, along with the support of governance structures, cooperate with functions such as internal audit, which could be a significant source of information necessary for their work.

audit committee, risk management, enterprise risk management, internal control, internal aud

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