The role and functions of the audit committee of the board of directors

In the article there is an analysis of the national legal norms regarding the activities of audit committees, based on which the author concludes about their role in corporate governance in Ukraine. The determination of the economic competence of the audit committee of the board of directors is the article objective, which is achieved through the study and analysis of legislative acts and relevant scientific researches. The author states that the board of directors, in the course of exercising its economic competence, may, and in certain cases must, establish committees, including an audit committee, from among its members and other individuals, for the preliminary study and preparation of issues for discussion at meetings. The author concludes that the majority of members of the audit committee of a socially significant enterprise should not be affiliated with that enterprise (hold positions within it), and the chair of the committee should be appointed from among independent members. Taking into account the current national legal norms, the author concludes that the establishment of an audit committee by the board of directors may be mandatory, conditionally mandatory, voluntary, or conditionally voluntary. The grounds for such classification of prerequisites for the establishment of an audit committee by the board of directors are elaborated by the author in the article. To achieve the article objective, the author analyses the difference between external and internal audits. Based on the fact that several national corporations are required to conduct internal audits and establish an internal audit function (appoint an internal auditor), the article explores the boundaries of competence between the internal audit function (internal auditor) and the audit committee of the board of directors, and concludes that their competencies are not identical. Since the failure to establish an audit committee or not assigning relevant functions to an entity (subdivision) may lead to administrative liability for responsible individuals, the author examines the grounds for such liability. However, the conclusion is that the practical implementation of the relevant national norm regarding liability is currently absent due to the lack of amendments to the Code of Ukraine about Administrative Offenses.