The Handbook of Board Governance, 2nd Edition

23Financial Literacy and Audit Committees: A Primer for Directors and Audit Committee Members

Jason Masters

Nonexecutive Director, Audit and Risk Committee, and Expert in IT and Corporate Governance and Probity

Editor's Note

Because financial literacy is often a required competency, I thought I would offer my perspective to introduce this particular chapter.

My experience in assessing and training both non-Audit Committee directors on the board and Audit Committee members is that there frequently can be (i) a lack of financial literacy on the board and Audit Committee; (ii) inadequate functioning of the Audit Committee in its oversight of the auditors (external and internal), financial reporting, risk management (including technology), conduct, and whistleblowing; and (iii) inadequate reporting from the Audit Committee to the board.

There is also a tendency even now for management to crowd out or unduly influence the Audit Committee—external auditor, internal audit, risk and compliance function relationships.

I want to make a few remarks and then introduce this chapter. In responding to the above and reader requests since the first edition, I have asked an Audit Committee expert, Jason Masters, to write a chapter for new and even as a refresh for seasoned directors and Audit Committee members in an inviting, best practice, and easy-to-read format on Audit Committee and board oversight and relationships. Jason has exceeded my expectations.

A few remarks at the outset to frame ...