Audit Committees play an important role in the governance framework of organisations in both the public and private sectors. A distinguishing feature of an Audit Committee within an organisation’s governance framework is its independence from management.

In the context of the public sector, Audit Committees provide an independent source of assurance and advice to entities’ Accountable Authorities on key aspects of the entity’s operations.

Better practice entities recognise the benefits of an Audit Committee with members who have a broad range of skills and experience. Such members can independently review and advise the Accountable Authority on key aspects of an entity’s operations, including in the areas financial reporting, performance reporting, risk oversight and management and internal controls. However, Audit Committees are not a substitute for an entity’s management controls and accountabilities.

This Guide updates and replaces the Australian National Audit Office’s (ANAO) 2011 Public Sector Audit Committees Better Practice Guide. The Guide reflects the requirements of the Public Governance, Performance and Accountability Act (PGPA Act) and PGPA Rule section 17 - Audit committee for Commonwealth entities. The Guide includes a discussion on: a range of functions and responsibilities that may be undertaken by the Audit Committee of a Commonwealth entity; shared committee arrangements; and sharing resources between entities. Part 3 of the Guide also includes a number of checklists and other material for use by committees and entity management.

The aim of the Guide is to provide guidance on the operation of the Audit Committees of public sector entities operating under the PGPA Act. It is recognised that the large majority of Commonwealth entities have well-established audit committees. Nevertheless, the environment in which entities and their audit committees are operating continues to evolve. There is a tightening budgetary position, an increase in the use of shared services, a rationalisation of the number of Commonwealth entities, and an ongoing transition to the resource management framework introduced by the PGPA Act. All entities and committees are required to meet the requirements of the PGPA Act and Rules, including revised functions and membership arrangements It is also apparent that the expectations of Accountable Authorities about the extent of assurance they seek from the Audit Committee are increasing. These factors reinforce the need for Accountable Authorities to periodically review, in consultation with the Audit Committee, the committee’s functions and responsibilities and the committee’s capacity to be able to undertake the full range of responsibilities.

The Guide complements the ANAO’s Better Practice Guide Public Sector Internal Audit published in September 2012 and each entity is encouraged to use the Guide to identify, and apply, better practice principles and practices that are customised to its particular circumstances.