The Intended outcome 8.0 MCCG mention about the board is able to objectively review the Audit Committee’s findings and recommendations and ensure the reliable source of information on the financial statement.
The Code states that Audit Committee should possess comprehensive necessary skills to discharge its duties. All members should be able to financially literate and understand matters under the purview of the Audit Committee including the financial reporting process. So, nominating committee had played an important role in this case.From Code , Nominating Committee is chaired by an Independent Director or Senior Independent Director and needs to lead the succession planning and appointment of board members and annual review of board effectiveness, ensuring every individual director assessed performance independently. Nominating committee responsible on evaluated board’s balance of skills, experience and qualities, for identifying and nominating for the approval of the Board, giving full consideration to succession planning. For example, expertise, professional qualifications, professional ethics need to be considered.
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Nominating committee should able to manage the comprehensive evaluation on the performance and board’s and committee’s effectiveness annually and the process is properly documented. During the process, performance evaluation is used to examine whether non-executive directors spending enough time to perform duties. Besides, the evaluation of the efficacy of the overall Board and its Committees, and the contributions by director individually towards efficiency, and make recommendations to improve effectiveness. Nominating Committee should consider whether board able to achieve its duty and key functions and utilize the approved Board performance evaluation sheet. Annual performance evaluation of the Board is performed through the director’s evaluation forms to ensure effectiveness. In the case of non-executive directors, exercise evaluation to assess whether the non-executive directors perform duties and making recommendations for improvement by the Board and Committees. During director’s evaluation, the director has informed before and the criteria used for evaluation should agree by Committee and explained evaluation’s result to the directors.
Furthermore, carry on financial literacy’s appraisal of Audit Committee and perform post-evaluation with definite time established along with regularly reviewed the progress.Lastly, Board’s effectiveness is core governance structure of a well-governed and functioning company, since it directly affects the audit committee’s ability to monitor management’s financial reporting process. This because board can change the effectiveness degree on corporate governance because audit committee membership is directly controlled by the board. The good quality of financial reporting needs to be maintained. So, the board should know well with how audit committee reacts to the changing environment.