(1888PressRelease)
April 23, 2007 - Abou-El-Fotouh explained that audit committee self-assessment is a mandatory requirement for listed companies by some stock exchanges e.g. New York Stock Exchange. It is optional requirement for unlisted or privately owned companies. However, corporate governance writers recommend it as “best practice”
In providing an insight into the benefits of audit committee self-assessment, Abou-El-Fotouh explained that it improves effectiveness of audit committee and assists in identifying and implementing better procedures. The assessment allows companies and shareholders to benefit from the collective, insight and expertise of audit committee members
Abou-El-Fotouh pointed out that the assessment process is without its risks. It takes time particularly following up implementation of recommended changes. It can create litigation risk i.e. create evidence against the company that the audit committee has not done optimal job.
He further explained ` these risks can be mitigated by limiting assessment to matters essential to the committee’s role and designing the questionnaire to obtain helpful suggestions for improvement not mere criticism. The questions should not be about individuals or specific instances of internal control failure. Instead, questions should focus on the working method and solicit qualitative judgment. He recommends using a lawyer to help the committee evaluate the answers and recommendations'.
Abou-El-Fotouh went on to describe the possible steps of the self-assessment process. He explained `the assessment approach has three steps: The first step is for the chairman of the audit committee to decide who will coordinate the process and create the assessment questionnaire; who will provide input other than audit committee members e.g. chairman of the board, CEO, CFO, external auditors, others interacting with the Committee etc; and who will compile the results. The next step each participant completes the questionnaire independently and returns it to the coordinator. Then the audit committee chairman leads open discussion focusing on areas for improvement and areas showing great variations in answers. The final step is to compile a report to the board of directors on the effectiveness of the audit committee, recommendations for improvement and action plans or changes in its terms of reference'.
In concluding Abou-El-Fotouh said ' Oman is considered among top countries who applied the corporate governance occupying the top rank at the Arab countries level'. 'Oman International Bank applies the highest corporate governance standards in line with international best practice and the directives of the local regulators', he added.
