Audit Committee Terms of Reference

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The Audit Committee Terms of Reference outlines the Committee's composition, authority, meetings, reporting, mandate, and procedure.

Composition

The audit committee will be an advisory committee of the Corporate Services Committee and will be comprised of the Regional Chair, Co-Chairs of the Corporate Services Committee, and at least three other Councillors. All members of the Audit Committee shall be financially literate (able to understand the Region's internal and external reporting, accounting policies and process) and at least one member shall have demonstrated financial expertise.

Audit Committee deliberations will normally be supported by staff including the CAO, Chief Audit Executive/ Internal Auditors, Commissioner of Enterprise Resource Management Services, Treasurer, Director Financial Management & Planning and other appropriate staff as required.

The length of term to be served by members on the committee will be determined by the Corporate Services Committee, giving consideration to the benefits of periodic rotation of committee membership.

As with other committees of Council, the Audit Committee Chair and Vice Chair shall be elected from the membership of the committee at the first meeting of the year.

Authority

The Corporate Services Committee may authorize the Audit Committee to investigate any activity of the Region. All employees are to co-operate as requested by the committee.

With the approval of Regional Council the Audit Committee may assign staff (e.g. Internal Audit) or retain persons or a third party having special expertise to assist the committee in fulfilling its responsibilities.

Meetings

The audit committee is to meet at least three times per year.

The meetings will be scheduled to permit timely review of internal and external financial reporting and special purpose audit reports. Additional meetings may be held as deemed necessary by the Chair of the Niagara Region, Chair of the committee or as requested by any member or the external auditors.

Reporting

The minutes of meetings of the regular audit committee will be provided to the Corporate Services Committee. Oral reports by the chair on significant matters not yet minuted may be provided to the Corporate Services Committee at its next meeting.

The Audit Committee will report directly to Regional Council on special purpose audit and internal audit matters.

Supporting schedules and information reviewed by the committee will be available for examination by any Councillor upon request to the secretary of the committee.

An annual assessment of the effectiveness of the committee against the mandate should be conducted and reported to the Corporate Service Committee.

Mandate

The Audit Committee assists Regional Council in the provision of effective municipal government by overseeing the administrative systems regarding financial accounting, reporting, internal controls, safeguarding of corporate assets, compliance with legal, ethical, and regulatory requirements and the efficient and effective use of resources.

The responsibilities of the audit committee are to satisfy itself, on behalf of the Corporate Services Committee and Council, that:

The External Audit Function

  • The Niagara Region's annual consolidated financial statements are fairly presented in accordance with generally accepted accounting principles and to recommend to Corporate Services Committee and Council whether the annual financial statements should be approved
  • The audited financial statements of the Niagara Region's boards, agencies, and commissions and other audited financial statements be received for information purposes following approval by the respective Board or Standing Committee, to assist in its overall assessment of the Region's annual consolidated financial statements and internal controls over financial reporting
  • The Region has implemented appropriate systems of internal control over financial reporting and that these are operating effectively
  • The Region has implemented appropriate systems of internal control to ensure compliance with legal, regulatory and ethical requirements
  • The external audit function has been effectively carried out and that any matter which the independent auditors wish to bring to the attention of Audit Committee, Corporate Services Committee and/or Council has been addressed
  • The Audit Committee will approve the replacement, reappointment and/or appointment of the external auditors to Corporate Services Committee and Council

The Internal Audit Function

  • The Audit Committee will review and approve the mandate for Internal Auditing and ensure that all of the Region's operations are considered for review by Internal Audit based on a risk-based annual work plan
  • The Region has implemented appropriate systems of internal control to ensure compliance with legal, regulatory and ethical requirements
  • The audit functions have been effectively carried out and that any matter which the independent auditors wish to bring to the attention of Audit Committee, Corporate Services Committee and/or Council has been addressed
  • The reporting of the Internal Audit team is relevant, reliable, objective and transparent. In making this assessment the Audit Committee may recommend the use of external subject matter experts. For purposes of efficiency and matters of budgeting expenditures, it is recommended that the use of subject matter experts be determined annually when the Internal Audit team work plan is approved
  • Quality assurance reviews are conducted in accordance with the Institute of Internal Auditors' Standards for the Professional Practice of Internal Auditing
  • Internal auditing include a review of the adequacy of internal control systems for safeguarding assets, the effectiveness of corporate reporting systems regarding administrative and program performance and the level of compliance with legislation, regulations, corporate objectives, policies and ethics

Applicability of Procedural By-Law

As an advisory committee of Council the Audit Committee would be governed by the sections of the Region's Procedural By-law relating to advisory committees.

Internal Audit Charter

The Niagara Region Internal Audit Services Charter consists of the following sections:

  1. Mission
  2. Values and Principles
  3. Code of Ethics
  4. Rule of Conduct
  5. Scope of Work
  6. Independence
  7. Accountability and Responsibility
  8. Authority

Mission

Internal Audit Services provides independent, objective assurance and consulting services designed to add value and improve the organization's operations. The Niagara Region's Internal Audit Services will help the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

It is the mission of the Internal Audit Services to work with clients to achieve their business objectives. This will be accomplished by developing innovative partnerships and providing value-added solutions and helping clients manage risks, exploit opportunities, demonstrate accountability and support continuous business improvement.

The Internal Audit Services promotes accountability to organizational objectives by providing assurance to Senior Management that business and control risks are appropriately identified, assessed, managed and reported. It accomplishes this objective by furnishing independent and objective analyses, audits, evaluations, advice and consulting. The office is also mandated to undertake activities that promote effective risk management and controllership, including processes that facilitate consistent and systematic identification and reporting of risk.

Values and Principles

The Internal Audit Services will operate within the established Niagara Region employee values and in accordance with the following principles:

  • We will value, above all, the ability to serve our clients
  • We will demonstrate competence and due professional care in the execution of duties
  • We will provide balanced, objective reporting on risk and control to management and the Audit Committee
  • We will ensure uncompromising commitment to ethics and integrity
  • We believe that understanding our clients' culture and business environment is essential to excellence in service
  • We believe in teamwork, consultation and co-operation with clients, colleagues and private sector partners
  • We believe that accountability is essential to the responsible management of public services
  • We will resource our office with the necessary skills to respond to the needs of Senior Management and Audit Committee

Code of Ethics

Internal Auditors are expected to apply and uphold the following principles:

  1. Integrity - the integrity of an Internal Auditor establishes trust and thus provides the basis for reliance on their judgment
  2. Objectivity - the Internal Auditor exhibits the highest level of professional objectivity in gathering, evaluating, and communicating information about the activity or process being examined. The Internal Auditor will make a balanced assessment of all the relevant circumstances and are not unduly influenced by their own interests or by others in forming judgments.
  3. Confidentiality - the Internal Auditor respects the values and ownership of the information they receive and does not disclose information without appropriate authority unless there is a legal or professional obligation to do so
  4. Competency - the Internal Auditor applies the knowledge, skills and experience needed in the performance of internal audit services

Rules of Conduct

The Office of the Chief Audit Executive and the Internal Auditors within it will adhere to the following rules:

  1. Integrity
    1. Shall perform their work with honesty, diligence, and responsibility
    2. Shall observe the law and make disclosures expected by the law and the profession
    3. Shall not knowingly be a party to any illegal activity, or engage in acts that are discreditable to the profession of internal auditing or to the organization
    4. Shall respect and contribute to the legitimate and ethical objectives of the organization
  2. Objectivity
    1. Shall not participate in any activity or relationship that may impair or be presumed to impair their unbiased assessment. This participation includes those activities or relationships that may be in conflict with the interests of the organization.
    2. Shall not accept anything that may impair or be presumed to impair their professional judgment
    3. Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review
  3. Confidentiality
    1. Shall be prudent in the use and protection of information acquired in the course of their duties
    2. Shall not use information for any personal gain or in any manner that would be contrary to the law or detrimental to the legitimate and ethical objectives of the organization
  4. Competency
    1. Shall engage only in those services for which they have the necessary knowledge, skills, and experience
    2. Shall perform internal audit services in accordance with the International Standards for the Professional Practice of Internal Auditing (Standards)
    3. Shall continually improve their proficiency and the effectiveness and quality of their services

Scope of Work

To fulfill its role of assisting Niagara Region accomplish its business objectives, the Internal Audit Office offers a wide range of services. These services can be organized into two main business lines: Assurance Services and Education and Consulting.

Assurance

These are services that provide independent assessments of internal processes and controls and the effectiveness of operations. These services consist of compliance, financial, value for money and operational/performance audits, control reviews and pre/post implementation evaluations.

Education and Consulting

These services comprise risk assessments, education and awareness initiatives and specialized consulting. They are intended to provide client support for decision making, the development of plans to improve operations and mitigate risks, implement new policies and re-engineered services and improving the capacity, reliability and integrity of information.

Internal Audit Services' processes should function in a manner to help ensure:

  • Risks are appropriately identified and managed
  • Significant financial, managerial and operating information is accurate, reliable and timely
  • Actions are in compliance with policies, standards, procedures and applicable laws and regulations
  • Resources are acquired economically, used efficiently and are adequately protected
  • Programs, plans and objectives are achieved
  • Significant legislative and regulatory issues impacting the Region are recognized and addressed properly
  • Quality and continuous improvement are fostered in the organization's control processes

Independence

The Internal Audit Services is accountable functionally to the Audit Committee and administratively to the Chief Administrative Officer in a manner outlined in the following section on Accountability and Responsibility. In addition, Audit Committee is responsible for providing input into the performance evaluation of the Chief Audit Executive.

In carrying out individual assignments, internal auditors shall be independent of those directly responsible for the activities subject to audit or evaluation, and report any potential conflicts to the Chair of Audit Committee.

All Internal Audit Services activities shall remain free of influence by any element in the organization, including matters of audit selection, scope, procedures, frequency, timing or report content to permit maintenance of an independent and objective attitude necessary in rendering reports.

Audit Services shall have no direct operational responsibility or authority over any of the activities it reviews. Accordingly, it shall not develop nor install systems or procedures, prepare records or engage in any other activity which would normally be audited.

Accountability and Responsibility

The Chief Audit Executive, in the discharge of his/her duties, shall be accountable to the Audit Committee and to the Chief Administrative Officer to:

  • Annually develop an audit plan that is based on a corporate risk assessment of the core programs, businesses and services that is approved by Audit Committee
  • Provide at least semi-annual updates to Audit Committee on the progress of the audit plan and any other significant issues, developments or findings related to the adequacy and effectiveness of the Region's processes for controlling its activities and managing its risks
  • Reporting any scope limitations that may be be obstructing the achievement of the office's objectives
  • Coordinate with other control and monitoring functions, including, but not limited to risk management, compliance, legal, and external audit
  • Establishing appropriate policies and procedures to guide the internal audit function including quality assurance and improvement program
  • Maintaining a professional audit staff with sufficient knowledge, skills, experience, and professional certifications to meet the requirements of this Charter
  • Acting as an ongoing resources to management by providing impartial and objective advice related to control and risk management issues
  • Assisting in the investigation of suspected fraudulent activities within the Region and notify management and the Audit Committee of the results
  • Liaising with the Region's external auditors as appropriate for the purpose of providing adequate audit coverage to the Region

Authority

Internal Audit Services is authorized to:

  • Have unrestricted access to all operations, functions, records, property, and personnel
  • Have full and unfettered access to the Audit Committee
  • Allocate audit resources, set frequencies, select subjects, determine scopes of work and apply the techniques required to accomplish audit objectives
  • Obtain the necessary assistance of personnel in units of the organization where they perform audits, as well as other specialized services from within or outside the organization

Internal Audit Services is not authorized to:

  • Perform any operational duties for the Region or its agencies
  • Initiate or approve accounting transactions external to Internal Auditor Services
  • Direct the activities of any Regional employee not employed by Internal Auditor Services, except to the extent such employees have been appropriately assigned to auditing teams or otherwise assist the Internal Auditor
  • Devise, develop or install systems or procedures, prepare records, make management decisions or undertake any activity which would relieve other staff of any responsibility assigned to them and which could be reasonably construed to compromise the independence of Internal Auditor Services

Standards of Audit Practice

The Office of the Chief Audit Executive will strive to meet or exceed the International Standards for the Professional Practice of Internal Auditing established by the Institute of Internal Auditors. This Charter takes effect on April 27, 2017.


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