The role of the audit committee in supporting the external auditor's independence and effectiveness

This article discusses the developments and factors that impact on the external audit function, and analyses the role that an effectively functioning audit committee can play in supporting the external auditor's independence and effectiveness. This is done through a literature review of external audit and audit committee developments, and is supported by empirical evidence obtained from assessing the annual reports and from questionnaires sent to the audit committee chairs of the Top 40 listed companies in South Africa. The main findings of the study are that audit committees at the largest listed companies in South Africa are taking responsibility for overseeing the external audit function, but that the disclosure thereof in annual reports was found to be lacking. These findings are of significance as they provide support for the recommendations of King III (effective from 1 March 2010) that all companies should form audit committees and that external audit should be given oversight responsibilities in this regard.