Audit Committee Members

Distinguish between executive and non-executive directors

 Executive directors are full time members of staff, have management positions in organisation, are part of the executive structure and typically have industry or activity-relevant knowledge or expertise, which is the basis o their value to the organisation.

 Non-executive directors are engaged part-time by the organisation, bring relevant independence, external input and scrutiny to the board, and typically occupy positions in the committee structure.


Advantages of members of Audit Committee being non-executive rather than executive

 Separation and detachment from the content being discussed is more likely to bring independent scrutiny.

 Sensitive issues relating to one or more areas of executive oversight can be aired without vested interests being present.

 Non-executive directors often bring specific expertise that will be more relevant to a risk problem than more operationally-minded executive directors will have.


Disadvantages of members of Audit Committee being non-executive rather than executive

 Direct input and relevant information would be available from executives working directly with the products, systems and procedures being discussed if they were on the committee.

 Non-executives are less likely to have specialist knowledge of products, systems and procedures being discussed and will therefore be less likely to be able to comment intelligently during meetings.

 NED will need to report their findings to the executive board. This reporting stage slows down the process, thus requiring more time before actions can be implemented, and introducing the possibility of some misunderstanding



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