1. This section gives general guidance on establishing and operating audit committees and providing members of audit committees with support in their roles. The guidance is aimed at all organisations to which the Scottish Public Finance Manual (SPFM) is directly applicable, including the core Scottish Government (SG), the Crown Office and Procurator Fiscal Service (COPFS), SG Executive Agencies, non-ministerial departments and bodies sponsored by the SG.
6. Generally accepted good practice indicates that the boards (and Accountable Officers) of individual accounting entities should ensure that effective arrangements are in place to provide assurance on risk management, governance and internal control. In this respect, the board (and Accountable Officer) should be advised independently by an audit committee. All such bodies to which the SPFM is directly applicable should therefore establish audit committees.
7. The board (or Accountable Officer) should establish an audit committee of at least three members. The members should be either non-executive directors or, if there are insufficient non-executives, independent external members. Committees should be chaired by a non-executive director and at least one of the committee members should have recent and relevant financial experience. The terms of reference of the audit committee, including its role and the authority delegated to it by the board or Accountable Officer, should be made available publicly.
Audit Committee status
Audit Committee handbook
9. All audit committees in organisations to which the SPFM is directly applicable are subject to the guidance in the Audit Committee Handbook published by the SG setting out the fundamental principles of membership and work of audit committees, including explanatory good practice notes. A degree of flexibility will be appropriate in applying the guidance in the Handbook, particularly with regard to smaller accounting entities.
10. Guidance for Audit and Risk Committee Members in the Core Scottish Government is associated guidance, entirely consistent with the SG Audit Committee Handbook, which has been produced specifically for members of the Scottish Government SG Audit and Assurance Committee (SGAAC) and Director General Assurance Meetings, which taken together cover the core SG.
Reporting significant problems
11. Audit committees in the COPFS, SG Executive Agencies, non-ministerial departments and bodies sponsored by the SG exist essentially to service the specific assurance needs of their Accountable Officers and boards. However, they also have a role in providing the assurance required to underpin the governance statement provided by the Principal Accountable Officer (the SG Permanent Secretary) as part of the consolidated accounts of the SG.
12. Audit committees in the COPFS, SG Executive Agencies, non-ministerial departments and bodies sponsored by the SG are therefore required, at the earliest opportunity, to notify the relevant Director General Assurance Meetings if they consider that they have identified a significant problem which may have wider implications. (Where the SG sponsorship role is undertaken by an SG Executive Agency it is the Agency audit committee that should be notified in the first instance.) Director General Assurance meetings will in turn report relevant issues to SGAAC.
Page updated: June 2021