Audit Committee Performance Evaluation

The following Deloitte & Touche LLP
(Deloitte & Touche) questionnaire can
be used to assist in the self-assessment
of an audit committees performance.
The questionnaire is based on emerging
practices identified through our review
of public remarks and publications of
organizations such as Financial
Executives International, the American
Institute of Certified Public Accountants,
the Securities and Exchange
Commission, and the National
Association of Corporate Directors.
Emerging practices were also identified
from the marketplace observations of
our client service professionals.
The performance evaluation process for
audit committees has many facets, and
members are encouraged to consider
other resources, including the Deloitte &
Touche Audit Committee Checklist for
New Sarbanes-Oxley and NYSE and
NASDAQ Listing Requirements, the
Deloitte & Touche Financial Literacy
Self-Assessment Tools, and The AICPA
Audit Committee Toolkit.
When completing the performance 4.
evaluation, the following process may be
employed:
1. Select a coordinator and establish a
timeline for the evaluation process.
2. Identify those individuals who
interact with the audit committee
members and who can provide
feedback.
3. Select the appropriate rating that
most closely reflects the audit
committees performance related to
each practice.
Completed evaluations should be
provided to the evaluation
coordinator for consolidation into a
summarized document.

For each of the following statements, select a number between 1 and 5, with 1 indicating that you strongly disagree, and 5
indicating that you strongly agree with the statement. Select 0 if you do not have enough knowledge or information to rank
your organization on a particular statement.

Insufficient Strongly Neither agree Strongly

Circle one number for each statement knowledge disagree nor disagree agree

Composition & Quality

1. Potential board members are identified with explicit consideration being 0 1 2 3 4 5
given to the candidates qualifications for serving on the audit committee.

2. Sources acting independent of management (e.g. independent board 0 1 2 3 4 5

members assisted by an outside search firm) have been utilized to identify
qualified audit committee members.
3. Members have the appropriate predefined qualifications to meet the 0 1 2 3 4 5
objectives of the audit committees charter, including appropriate financial
literacy.
4. Audit committee members have differing perspectives due to a diversity 0 1 2 3 4 5
of experiences and backgrounds.
5. The audit committee demonstrates integrity, credibility, trustworthiness, 0 1 2 3 4 5
willingness to actively participate, industry knowledge, ability to
constructively handle conflict, interpersonal skills, and proactiveness.
6. The level of independence of the audit committee is acceptable. 0 1 2 3 4 5

7. The audit committee reviews its charter annually to determine whether its 0 1 2 3 4 5
responsibilities are adequately described.
8. The audit committee ensures compliance with corporate governance 0 1 2 3 4 5
regulations and guidelines.
9. The audit committee has developed a continuing education program to 0 1 2 3 4 5
enhance its members understanding of relevant auditing, accounting,
regulatory, and industry issues.
10. New audit committee members are provided with an orientation program 0 1 2 3 4 5
to educate them on the company and their responsibilities.
11. The audit committee, in conjunction with the nominating committee (or its 0 1 2 3 4 5
equivalent) as appropriate, creates a succession plan for audit committee
members, including the audit committee chair.

1
 Insufficient Strongly Neither agree Strongly
Circle one number for each statement knowledge disagree nor disagree agree

Understanding the Business, Including Risks

12. The audit committee considers the pressures on management that may 0 1 2 3 4 5
impact the quality of financial reporting (e.g. earnings targets,
compensation plans, and performance measures).
13. The audit committee considers the significant risks faced by the company. 0 1 2 3 4 5
Examples include (but are not limited to):
Regulatory requirements
Concentrations (e.g. suppliers and customers)
Competitive trends
Financing/liquidity needs
Financial exposures
Business continuity
Company reputation

14. Management provides the audit committee with reports that include 0 1 2 3 4 5
benchmarking information (that compares the companys financial
performance and ratios with industry competitors) and explanations for
areas that differ significantly.
Process & Procedures
15. The audit committee regularly reports to the board of directors. 0 1 2 3 4 5

16. The audit committee dedicates appropriate time and resources to execute 0 1 2 3 4 5
its responsibilities.
17. The audit committee participates in the development of a calendar and 0 1 2 3 4 5
agenda to ensure that responsibilities are met.
18. Members have the option to influence meeting agendas in order to 0 1 2 3 4 5
address emerging issues.
19. The audit committee encourages input on the meeting agenda from 0 1 2 3 4 5
management, the internal auditor, the external auditor, and the board of
directors.
20. The agenda and related information (e.g. prior meeting minutes, press 0 1 2 3 4 5
releases, financial statements) are circulated in advance of meetings, to
allow members sufficient time to study and understand the information.
21. Meetings are held at least quarterly. 0 1 2 3 4 5

22. The audit committee has private executive sessions with management, 0 1 2 3 4 5
internal audit and external audit.
23. The written materials provided to audit committee members are 0 1 2 3 4 5
appropriately balanced (i.e. relevant and concise).
24. If a whistleblower hotline exists, the audit committee reviews the log of 0 1 2 3 4 5
incoming calls.

2
 Insufficient Strongly Neither agree Strongly
Circle one number for each statement knowledge disagree nor disagree agree

Communications and Information

25. The tone at the top set by the audit committee promotes organization- 0 1 2 3 4 5
wide awareness of corporate ethics, quality financial reporting, and strong
internal controls.
26. The level of openness between members of the audit committee and other 0 1 2 3 4 5
board members is acceptable.
27. The level of openness between the audit committee and relevant parties 0 1 2 3 4 5
(management, internal audit, and external audit) is acceptable.
28. For matters that require specialized expertise, the audit committee 0 1 2 3 4 5
engages external parties as appropriate.
29. The audit committee receives information from management related to 0 1 2 3 4 5
changes in the organization on a timely basis.
30. The audit committee receives and analyzes information from management 0 1 2 3 4 5
on significant industry trends, analyst estimates and variations from
budget.
31. Members are made aware of communications received from agencies (e.g. 0 1 2 3 4 5
governmental or regulatory) relating to areas of alleged violations or areas
of non-compliance.
32. Members periodically visit company locations to conduct on-site meetings 0 1 2 3 4 5
with key members of management.
Oversight of the Financial Reporting Process, Including Internal Controls
33. The audit committee considers the quality and appropriateness of 0 1 2 3 4 5
financial accounting and reporting.
34. The audit committee reviews proxies and other filings. 0 1 2 3 4 5

35. The audit committee oversees managements procedures for enforcing the 0 1 2 3 4 5
companys code of conduct.
36. The audit committee oversees the organizations whistleblower process. 0 1 2 3 4 5

37. The audit committee considers the transparency of disclosures. 0 1 2 3 4 5

38. The audit committee reviews the companys accounting policies. 0 1 2 3 4 5

39. The audit committee has sufficient understanding of managements 0 1 2 3 4 5

process of developing and summarizing financial information (quarterly
and annually).
40. The audit committee has a process for the review of significant issues prior 0 1 2 3 4 5
to quarterly and annual earnings releases (i.e. with management and the
external auditors).
41. The audit committee understands and approves the process used by 0 1 2 3 4 5
management to identify related-party transactions.
42. The audit committee considers the transparency of related-party 0 1 2 3 4 5
disclosures.
43. The audit committee has a process to review earnings releases (including 0 1 2 3 4 5
pro forma or non-GAAP information, and other financial information or
earnings guidance) given to third parties.
44. The audit committee reviews the processes related to financial statements 0 1 2 3 4 5
certifications made by the CEO and CFO.

3
 Insufficient Strongly Neither agree Strongly
Circle one number for each statement knowledge disagree nor disagree agree

Oversight of the Financial Reporting Process, Including Internal Controls (Continued)

45. The audit committee receives sufficient information to evaluate the 0 1 2 3 4 5
organizations system of internal controls (e.g. financial reporting and
disclosure controls, operation controls, and compliance controls).
46. The audit committee oversees the organizations external financial 0 1 2 3 4 5
reporting and internal control over financial reporting.
47. The audit committee evaluates the internal control testing conducted by 0 1 2 3 4 5
management, the internal auditors, and external auditors to assess the
process of reasonably detecting internal control issues or fraud.
48. The audit committee believes that managements scope of internal control 0 1 2 3 4 5
testing adequately supports its internal control assessment (as required by
Section 404 of the Sarbanes-Oxley Act).
49. If managements assessment of internal controls resulted in the 0 1 2 3 4 5
identification of significant deficiencies or material weaknesses, plans to
address these issues are reviewed by the audit committee.
50. The audit committee makes inquiries of the appropriate parties (external 0 1 2 3 4 5
auditor, internal auditor and management) on the depth of experience and
sufficiency of staff.
51. The audit committee reviews the management recommendation letters 0 1 2 3 4 5
written by the auditors (external and internal) to ensure that all significant
matters raised are addressed.
52. The audit committee evaluates managements action plans as applicable 0 1 2 3 4 5
(i.e. to address internal control deficiencies and related corrective actions).
53. The audit committee takes action to ensure resolution when there are 0 1 2 3 4 5
instances of repeat comments from auditors and others about internal
controls.
54. Adjustments to the financial statements that resulted from the audit 0 1 2 3 4 5
process are reviewed by the audit committee, regardless of whether they
were recorded by management.
55. The audit committee is consulted when management is seeking a second 0 1 2 3 4 5
opinion on an accounting or auditing matter.
Oversight of Audit Functions
56. The audit committee evaluates the coordination of work between the 0 1 2 3 4 5
auditors (external and internal) to ensure that they appropriately address
their different areas of responsibility.
57. The audit committee regularly reviews the internal audit function (e.g. the 0 1 2 3 4 5
charter, audit plan, budget, compliance, and staff quality and continuity).
58. The audit committee oversees the role of the internal audit director from 0 1 2 3 4 5
selection to termination (e.g. appointment, evaluation, compensation and
retention).
59. The audit committee approves the reporting relationships of the internal 0 1 2 3 4 5
audit director.
60. The audit committee oversees the role of the external auditors from 0 1 2 3 4 5
selection to termination (e.g. appointment, oversight, evaluation,
retention, and approval of services).

4
 Insufficient Strongly Neither agree Strongly
Circle one number for each statement knowledge disagree nor disagree agree

Oversight of Audit Functions (Continued)

61. The audit committee reviews the appropriateness of the audit fees paid to 0 1 2 3 4 5
the external auditor.
62. The audit committee comprehensively reviews managements 0 1 2 3 4 5
representation letters to the external auditors (including making inquiries
about any difficulties obtaining the representations).
63. The audit committee assesses the overall independence of the external 0 1 2 3 4 5
auditor.
64. The audit committee pre-approves any internal control-related service 0 1 2 3 4 5
provided by the external auditor.
65. The audit committee considers the scope of non-audit services provided 0 1 2 3 4 5
by the external auditor in determining the external auditors
independence.
66. The audit committee reviews other professional services (e.g. consulting, 0 1 2 3 4 5
legal and tax strategy services) provided by outside consultants.

5
If you would like to benchmark your audit committees self-assessment, please complete the following questions
and provide the final performance evaluation to a Deloitte & Touche partner, principal, or director. Responses will
be accumulated with the results of other companies using our proprietary DeloitteDEX methodology, and you will
be provided with a benchmark summary.
Other Questions
Name of organization responding to survey:

Deloitte & Touche partner, principal, or director submitting the form:

Which of the following industry sector classifications best describes your organization?

Aviation & transportation Insurance

Banking Investment management services
Consumer Business Manufacturing
Energy Resources Not-for-profit
Gaming & casinos Publishing, media & enertainment
Government Real estate (including construction)
Health care and life sciences Technology
Higher education Telecommunications

What was your organizations total volume of sales in US Dollars last fiscal year?

Under $1 million $150 - $250 million

$1 - $10 million $250 - $500 million
$10 - $50 million $500 million - $1 billion
$50 - $100 million
$1 - $10 billion
$100 - $150 million
Over $10 billion
Is the company a SEC registrant?

Yes
No

6
Disclaimer for the Audit Committee Performance Evaluation

This Audit Committee Performance Evaluation (the Performance Evaluation) is limited in nature, and does not comprehend all
matters relating to audit committee effectiveness that might be pertinent to your self-assessment. Deloitte & Touche LLP (Deloitte
& Touche) makes no representative as to the sufficiency of this Performance Evaluation for your purposes, and, by means of the
Performance Evaluation, it is not rendering professional advice or services. This Performance Evaluation should not be used as a
basis for any decision that may affect your business. Deloitte & Touche does not assume any obligations as a result of your access
to this Performance Evaluation.

Information derived from the responses to this Performance Evaluation (other than company identifiable information) may be shared
by us with other companies, and we are not responsible for the disclosure or use of such information by such companies. This
Performance Evaluation is solely for your informational purposes and internal use and you will not disclose it to any other person or
entity.

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