The audit-committee charter that actually does its job.
Most charters describe meetings. The good ones describe authority, what the committee can ask for, who it can summon, and what the chair signs off on without escalation.
If you read enough audit-committee charters, you start noticing they are written for two different audiences. Most are written for the regulator, they describe meeting frequency, quorum, and a list of items the committee shall review. The good ones are written for the committee itself, they describe what authority the committee carries, what it can demand, and what the chair signs off without asking the board.
"Authority is what makes a charter useful. Frequency is just calendar."
What a useful charter actually contains
A useful charter answers, in order: who the chair reports to (in practice, not on the org chart); what reports the committee is entitled to demand from management or internal audit; what veto authority the committee has over external audit appointment, scope and fee; what private-session authority it has with the external auditor and head of internal audit; and what the committee’s independent-advice budget is.
Where the bad ones fall short
Bad charters use the passive voice. "The committee shall review internal-audit reports" tells you nothing about what the committee can do when it doesn’t like what it sees. "The committee may direct internal audit to conduct a special review, with first call on internal-audit resources up to X% of the annual plan, without further board approval", that is a charter doing its job.
- Can the committee replace the external auditor without board pre-approval?
- Can it commission a special review of any process at any subsidiary?
- Does it have an independent-advice budget?
- Does the chair have a private-session right with the head of internal audit and the external lead partner, every meeting?
- If the answer to any of these is "no" or "unclear", the charter is the problem.