Effective Audit and Risk Assurance Committees

An Audit and Risk Assurance Committee (ARAC) has a vital role in helping public sector organisations ensure that Accounting Officers and Boards gain the assurance they need on:

• governance;
• risk management;
• the control environment;
• the integrity of the financial statements; and
• other elements of the Annual Report and Accounts.

The ARAC provides an important governance function, helping to ensure that an organisation has good corporate governance and that it is effective and well managed. ARAC plays a crucial role in supporting the Board in meeting its obligations for setting an organisation’s risk appetite and ensuring that the framework of governance, risk management and controls is in place. This is highlighted in HM Treasury’s Corporate governance in central government departments: code of good practice guidance (April 2017).

ARAC’s role is a demanding one and requires strong and independent members with an appropriate range of skills and experience. It benefits from a collaborative relationship with the organisation to ensure that the committee gets the support and information that it needs. 

An ARAC is essentially an oversight committee, however it has to satisfy itself that key controls are operating, that risks are being properly managed, that key accounting estimates and judgements are being properly made and that internal and external audits are effective.

ARAC should act as the conscience of the organisation, providing insight and constructive challenge where required, such as on risks arising from fiscal and resource constraints, new service delivery models, information flows on risk and control, and the agility of the organisation to respond to existing and emerging risks.