“Corporate Governance and

Social Responsibility”
MS-438
Lecture 07
“ Committee of a Board”

By: Majeed Ullah Khan

Asst. Professor, Institute of Business Studies
KUST
Topic: Committee of the Board

Topic to be Discuss
Committee of the Board
Issues and Problems
Common Committees
The Audit Committee

Course: Corporate Governance and Social Responsibility, MS-438-- Instructor: Majeed Ullah Khan, Asst. Prof. Institute of Business Studies, KUST -- Email:
majeedullah@kust.edu.pk
Topic: Committee of the Board
Board Level Committee
Board is non-executive body
Meet at most 4 time in Year
Board have limited time for coverage of all issues presented
 So, necessary for board to get assistance from some expert
 Forming committee is one way to get assistance
 Some committees are required by Law and some are for better governance
Advantages of committee are:
1. Impartial and professional input 2. Reduce workload 3. Detailed and
specialized information

Course: Corporate Governance and Social Responsibility, MS-438-- Instructor: Majeed Ullah Khan, Asst. Prof. Institute of Business Studies, KUST -- Email:
majeedullah@kust.edu.pk
Topic: Committee of the Board
Issues and Problems
Board level committee need be handle efficiently by board
Committee delay decision
Board member hide behind the Committee recommendations
 Lack of competency and skill in Board level committees
 Committee fails to perform its function- also other to perform it
In developing countries, committee is ONE-MAN SHOW
Committee are manipulated by Management or Controlling shareholders

Course: Corporate Governance and Social Responsibility, MS-438-- Instructor: Majeed Ullah Khan, Asst. Prof. Institute of Business Studies, KUST -- Email:
majeedullah@kust.edu.pk
Topic: Committee of the Board

Common Committees
Audit Committee
Nomination Committee
Executive Committee
Remuneration Committee
Compliance Committee
Companies combine functions of two committees into one
Functions of compliance committee and Audit committee
Functions of Remuneration and nomination commitee
Course: Corporate Governance and Social Responsibility, MS-438-- Instructor: Majeed Ullah Khan, Asst. Prof. Institute of Business Studies, KUST -- Email:
majeedullah@kust.edu.pk
Topic: Committee of the Board
Audit Committee
Membership of Audit Committee
 All members are Independent non- executive directors (INED)
 No executive directors are made member to endure its independence
The Chairman of INED must be INED
Sarbanes-Oxley act 2002 requires one member must be financial expert
Audit Committee can hire outside expert for its assistance

Course: Corporate Governance and Social Responsibility, MS-438-- Instructor: Majeed Ullah Khan, Asst. Prof. Institute of Business Studies, KUST -- Email:
majeedullah@kust.edu.pk
Topic: Committee of the Board
Audit Committee
Responsibilities of Audit Committee
 Oversight of Financial reporting and accounting system
 Liaison with external auditor of the company
Ensuring compliance in respect of disclosure and other requirement of
law relating to financial statements
Monitoring the internal control process of the company
Oversight of the risk management process of the company

Course: Corporate Governance and Social Responsibility, MS-438-- Instructor: Majeed Ullah Khan, Asst. Prof. Institute of Business Studies, KUST -- Email:
majeedullah@kust.edu.pk
Topic: Committee of the Board
Audit Committee
Term of Reference of Audit Committee:
• Determination of appropriate measures to safeguard the listed company’s assets;
• Review of quarterly, half-yearly and annual financial statements of the listed company, prior
to their approval by the Board of Directors
• Review of preliminary announcements of results prior to publication;
• Facilitating the external audit and discussion with external auditors of major observations
arising from interim and final audits and any matter that the auditors may wish to highlight
(in the absence of management, where necessary);
• Review of management letter issued by external auditors and management’s response thereto
• Ensuring coordination between the internal and external auditors of the listed company;
• Review of the scope and extent of internal audit and ensuring that the internal audit function
has adequate resources and is appropriately placed within the listed company;
• consideration of major findings of internal investigations of activities characterized by fraud,
corruption and abuse of power and management's response thereto;

Course: Corporate Governance and Social Responsibility, MS-438-- Instructor: Majeed Ullah Khan, Asst. Prof. Institute of Business Studies, KUST -- Email:
majeedullah@kust.edu.pk
Topic: Committee of the Board
Audit Committee
Term of Reference of Audit Committee:
• Ascertaining that the internal control systems including financial and operational
controls, accounting systems for timely and appropriate recording of purchases and
sales, receipts and payments, assets and liabilities;
• Review of the listed company’s statement on internal control systems prior to
endorsement by the Board of Directors and internal audit reports;
• Instituting special projects, value for money studies or other investigations on any
matter specified by the Board of Directors, in consultation with the CEO and to
consider remittance of any matter to the external auditors or to any other external
body
• Determination of compliance with relevant statutory requirements
• Monitoring compliance with the best practices of corporate governance and
identification of significant violations
• Consideration of any other issue or matter as may be assigned by the Board of
Directors
Course: Corporate Governance and Social Responsibility, MS-438-- Instructor: Majeed Ullah Khan, Asst. Prof. Institute of Business Studies, KUST -- Email:
majeedullah@kust.edu.pk
Course: Corporate Governance and Social Responsibility, MS-438-- Instructor: Majeed Ullah Khan, Asst. Prof. Institute of Business Studies, KUST -- Email:
majeedullah@kust.edu.pk