Role of the Audit Committee

Audit committees play a critical role in supporting audit quality and confidence in financial reporting. Effective audit committees, together with high-quality audits, help promote confidence in the integrity and reliability of financial reporting. This confidence is essential for investors who rely on financial statements to make informed decisions.

Under the Canadian Securities Administrators’ National Instrument 52-110 Audit Committees, audit committees are responsible for overseeing the issuer’s financial reporting processes and the work of the external auditor. They are directly responsible for the appointment, compensation, retention and oversight of the external auditor, including assessing the auditor’s independence. The audit committee also serves as an important link between management, the external auditor and the board of directors, helping to support transparent and effective communication throughout the financial reporting and audit process. 

To fulfill these responsibilities, audit committees should understand the auditor’s risk assessment and audit strategy, be satisfied that it addresses the significant risks, and consider whether the auditor has the expertise and resources necessary to perform a high-quality audit. In addition, audit committees should seek to understand how the auditor exercised professional skepticism and maintained an objective and independent mindset when evaluating management’s judgements and assumptions. 

Audit committees can also gain valuable insight by discussing how audit quality is promoted, monitored and measured within the audit firm. Topics may include how consistency is achieved across engagements and how accountability for audit quality is reinforced throughout the organization. These discussions can help audit committees assess the firm’s commitment to delivering high-quality audits and strengthen their oversight of the external auditor.

Sharing of CPAB inspection findings with audit committees

In accordance with the  Mandatory Protocol for Audit Firm Communication of CPAB Inspection Findings with Audit Committees (Protocol), audit firms are required to share reporting issuer-specific inspection results with the reporting issuer’s audit committee. This Protocol, which was previously voluntary, became mandatory as of March 24, 2025.

Insights from our conversations with audit committees

CPAB regularly meets with audit committee chairs to discuss audit quality insights through one-on-one meetings, industry forums and audit quality roundtables.

Refer to the Resources section below for more information on our ongoing engagement with audit committees.