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Introduction to Auditing

Audit committee is made for the development of the organisation. It is made because the entity needs a true and fair report of its compliances and this can be done by using the elements of the corporate governance report. If the transparent view or report is made by the entity then it will be able to have the more effective relations with its stakeholders (Messier, 2016). So it can be said that the audit committee is having very vital role in making the true and fair report of the organisation. Next Plc is a retail company and is operating its activities in the filed of the clothing and footwear. Along with this it is providing the services in the filed of home appliances. In this report the role of the audit committee and its compliances are described. The purpose of the report is to find out and address the provisions related with the audit commit.

TASK A

Composition of Audit Committe

Audit committee is made for the good governance of the company and its functional activities. There are some norms made by the corporate laws of the UK so that the functions can be operated in the most effective way. It should consist three independent non executive directors or two from the outside of the company. There is a chairman of the audit committee should be an independent director. Apart from this he can be an additional member of the committee provided the  should not chair the committee at the time of the appointment (Tepalagul and Lin, 2015). Along with this the board members of the organisation should ensure that all the members of the audit committee should be financial literate. They should have the professional qualification of the relevant filed. If the company or the members of the audit committee are not fulfilling this criteria then they will be held liable for the penal provisions. The expert of the committee members must be retired fiancée director from the another company or a partner from an accountancy firm.

Appointment, reappointment and removal of the Auditors

Appointment of the audit committee is made on the recommendation of the nomination committee. The appointment of the members of the audit committee should be of three years. Thus it can be said that the auditors must be appointed at the recommendation of the board of the directors. In the annual report of the company appointment of the auditor is included. Resignation of the auditors must be approved by the board of the directors in the meeting of the board. The reappointment of the auditors can be done after expiry of the auditor's work duration (Miko and Kamardin,  2015).

Remuneration of the Auditors

Audit committees have wide ranging, time consuming and they have to work for the development of the business. Their role is to have a true and fair view about the company and its proceedings. The level of the remuneration which is to be paid to the auditors should not exceed the fees paid to the other board members. Along with this the remuneration of the chairman is much higher than the other members as he pays more time and efforts to the functioning of the business (Rupšys and Stačiokas,  2015).

Engaging of the Auditors for the Provisions of non audit services

The audit firm is made so that a true and fair view report of the company and its matters. They are trained to understand the various external elements of the business and provide their view point about it.  If the auditors are doing non audit services then these can be included in below mentioned categories:

A service which require some legislation and contracts undertaken by the auditors of the business. These can be:

  • Prudential Regulatory Authority.
  • Legal and statutory requirements on the matters such as issue of shares for non cash consideration and expenditure for grant application purpose (Lenz and Hahn, 2015).
  • And the requirements related with the contracts such as lenders and vendors on net asset.
  • Services that are most effective for the benefit of the business and these can be:
  • The matters can be related with the financial records and it is not described under law for the auditors to do these activities of functions.
  • Tax compliances, these are the issues which can be related with the taxation policy of the entity.
  • To make some reports which are required on a urgent basis (Lord,  2016).

There are some another most important functions which can be related with the trade activities the