Managing Conflict of Interest - Organisation for Economic Co ...

170 Managing Conflict of Interest• The board shall establish a sound system of internal controlsand issue a statement that the internal control is sound indesign and effectively implemented.• The Code includes the stipulation that all significant mattersmust be brought before the board.• The Code includes the requirements to establish an auditcommittee, with nonexecutive directors in the majority.It also outlines the minimum requirements for the “terms ofreference” of the audit committee and the minimum numberof meetings, including meetings the committee musthave with external and internal auditors without the presenceof management.• The board is required to establish an internal auditfunction.• The audit committee is required to monitor and recommendthe appointment of external auditors.• External auditors are required, at a minimum, to rotatethe engagement partner every five years. The Code alsoimposes restrictions on non-audit services to be providedby the external auditors. Further, the external auditors mustobtain a satisfactory rating of quality control, and complywith ethical standards of the International Federation ofAccountants.• The board shall approve the terms and appointments ofthe CFO, the corporate secretary, and the head of internalaudit.• The CFO and the corporate secretary may be removed onlywith the approval of the board.• The CFO and the corporate secretary must attend all boardmeetings.• The board must ensure the veracity and fairness of financialstatements, and provide necessary statements regardingkey issues, e.g., related-party disclosures. 33Related-party disclosures are covered under IAS 24. The objective is to ensurethat an entity’s financial statements contain the disclosures necessary to drawattention to the possibility that its financial position and profit or loss mayhave been affected by the existence of related parties and by transactions andoutstanding balances with such parties. Source: http://www.iasplus.comADB/OECD Anti-Corruption Initiative for Asia and the Pacific