What is Audit Committee?
An audit committee is a subcommittee of the board of directors responsible for overseeing financial reporting, internal controls, external auditors and risk management. The CMA Corporate Governance Regulations require companies listed on Tadawul’s Main Market to have an audit committee of three to five members, none of them executive directors, including at least one independent director and one member specialised in finance and accounting (Article 51).
How It Works
- Composition: at least three members, mostly independent, with one financial expert.
- Reviews financial statements before board approval.
- Recommends appointment, fees and scope of external auditor.
- Oversees internal audit function and internal control framework.
Saudi Context
Under Article 54 the committee must hold at least four meetings during the company’s financial year and meet periodically with both the external and the internal auditor, either of whom may call a meeting at any time. Article 51(a) applies on the Parallel Market (Nomu) as well as the Main Market.
Example
An audit committee meets with both internal and external auditors to review a material weakness in revenue controls before signing off on the annual report.
