The Audit Subcommittee is to assist the Board of Trustees in fulfilling its responsibilities as to accounting policies and reporting practices of the University and sufficiency of auditing relating thereto. The primary function of the Audit Subcommittee is to assist the Board of Trustees' Finance Committee in fulfilling its financial oversight responsibilities. In carrying out its oversight responsibilities, the Audit Subcommittee is not providing any expert or special assurance as to the University's financial statements. Specifically, the Audit Subcommittee will see that the University's management maintains:
- an adequate system of internal controls,
- the integrity of the University's financial statements, and
- processes to ensure compliance by the University with all applicable legal and regulatory requirements and University policy.
The Audit Subcommittee shall be composed of a minimum of three members from the Finance Committee of the University of Kentucky Board of Trustees, appointed by the Chair of the Finance Committee, who shall serve as Chair of the Audit Subcommittee.
The Audit Subcommittee is to meet at least twice per year and as many times as the Committee deems necessary.
Members of the Audit Subcommittee are to be present at all meetings. As necessary or desirable, the Chair may request that members of management, the Director of Internal Audit, and/or representatives of the independent auditor be present at a meeting of the Committee. Two out of three members should be present to have a quorum.
Functions and Responsibilities
The Audit Subcommittee is to:
(1) Review with management and the independent auditor, upon completion of its audit, financial results for the year.
(2) Serve as the authority to which the independent auditors report. The Audit Subcommittee of the Board of Trustees' Finance Committee has the ultimate authority and responsibility to appoint, compensate, retain, oversee and, where appropriate, replace the independent auditors.
(3) Review, prior to the start of the annual audit, the scope and general extent of the independent auditor's planned examination, including its engagement letter. The auditor's fees are to be arranged with management and summarized annually for Committee review. The Committee's review should entail an understanding from the independent auditor of the factors considered by the auditor in determining the audit scope.
(4) Review at least annually: (1) a report describing the independent auditors' Firm's internal quality-control procedures and (2) a report describing any material issues raised by the latest internal quality-control or peer review of the Firm.
(5) Review with management and the independent auditor the extent of non-audit services planned to be provided by the independent auditor in relation to the objectivity and independence needed in the audit. All non-audit related services, other than related accounting or tax research and/or tax return preparation, to be performed by the external auditor and related fees are to be reviewed and approved by the Audit Subcommittee prior the independent auditor beginning work on such services.
(6) Review and examine the objectivity, effectiveness and resources of the Internal Audit Department.
(7) Concur in the appointment, replacement, reassignment or dismissal of the Director of Internal Audit.
(8) Review the internal audit plan for the current year and review the risk assessment procedures used to identify projects included in the plan.
(9) Review, with the Director of Internal Audit, the results of internal audit activities and progress with respect to the internal audit plan.
(10) Consider and review with management and the independent auditors:
- The effectiveness of, or weaknesses in, the University's internal controls, including the status and adequacy of management information systems and other information and security, the overall control environment, and accounting and financial controls
- Any related significant findings and recommendations of the independent accountants, together with management's response thereto, including the timetable for implementation of recommendations to change internal controls