Corporate governance: impact of King III
On 25 February 2009, the King Committee on Corporate Governance released the draft code of governance principles and the draft report on governance. Together, these draft documents are referred to as King III.
King III applies to all entities regardless of the manner and form of incorporation or establishment. Adherence to these principles will result in good governance being practised.
King III tasks the audit committee with the responsibility of monitoring the appropriateness of the company’s combined assurance model and ensuring that significant risks facing the company are adequately addressed. The impact on audit committees can be summarised as follows:
- audit committees should identify significant risks facing the company.
- an assessment of in-house skills and the qualifications or track record of external assurance providers (e.g. external auditors) should be performed.
- audit committees should coordinate the utilisation of appropriate assurance providers in the assurance model (management, internal auditors, external auditors, etc.) to provide assurance on the identified risks.
- a combined assurance model may result in the increased utilisation of external assurance providers (e.g. external auditors).
King III requires a statement from a company’s board on the effectiveness of internal financial controls. In addition, this statement needs to be supported by a formally documented annual review of internal financial control. The audit committee should determine the nature and extend of the formal documented review of internal financial controls and should conclude and report annually to the board on the effectiveness of internal financial controls.
For more information, contact Mr JS (Tenk) Loubser on tel. 021 808 7220 or e-mail email@example.com.