Denmark Enhances Audit Committee Role

Adopting Europe’s Eighth Directive will drive more Danish companies to establish audit oversight.

 

Denmark is implementing the 2006 European Union (EU) Statutory Audit Directive (Eighth Directive) and Company Reporting Directive. The two EU laws require publicly listed companies to establish an audit committee and to include a corporate governance statement in their annual reports. The directives are expected to push more Danish companies to adopt audit committees. Currently, less than 15 Danish firms have formal audit committees.

 

According to a recent KPMG analysis, the directives provide a basic corporate governance framework and then mandate that companies follow best practices. The Danish Corporate Governance Committee has produced a voluntary governance code that details best practices, and companies are expected to comply or explain why they do not comply. A specific requirement of the Eighth Directive is that audit committees monitor the effectiveness of the company’s internal controls and risk management system.

One big problem companies face in establishing audit committees is finding enough independent directors who are qualified to serve on them, the KPMG analysis notes. Another issue is defining audit committee responsibilities so that they don’t conflict with management. To keep these roles separate, companies in Denmark typically have a two-tier board — a management board and a supervisory board. Companies select audit committee members from the supervisory board. The audit committee is responsible for monitoring the external audit as well as audit independence, including the delivery of nonaudit services and oversight of internal auditing.

                                                                          Contact us for ACL products and solutions in the Nordic region >>

                                                                          Enquire about ACL product training >>

                                                                          Know more about ACL >>