Board Committee Roles and

Responsibilities

6. RINDY WULAN 11160000104

7. FITRIYA PERMANA SARI 11160000123
8. WINDI YUNIARA 11160000145
9. IBRAHIM DAFA 11160000166
10. MIA MELYANTI OKTARI 11160000177
 INTRO

The oversight function of CG is performed by the

company’s board of directors and its designated
committees. Boards of directors perform their advisory
and oversight function trough well-structured,
planned, and assigned committees to take advantage
of the expertise of all the directos. The establishment
of board committees can bring more focus to the
board’s oversight function by giving proper authority
and responsibilities and by demanding accountability
for these companies.
 Previous Research

The study conducted by Bernadinus Chrisdianto on the Role of the Audit

Committee in Good Corporate Governance. Syakhroza (2003) states that good
corporate governance is a system of governance that is carried out by
considering all the factors that influence the institutional process, including
factors related to the regulatory function. The company's audit committee has
a role to create good corporate governance. That's because the Audit
Committee can support company management in fulfilling all the principles
of good corporate governance whitch include: transparency, accountability,
responsibility and fairness.
Audit Committee has the ability to create efficiency and effectiveness to
improve company performance which functions as an effort to increase the
Value given to stakeholders as the goal of implementing good corporate
governance. The Audit Committee will take part in the achievement of good
corporate governance if it can maintain its independence. This is related to
the audit of the committee's ability to work without any pressure so that it is
objective to carry out its functions which means it does not damage other
businesses, so that it is fair in carrying out its functions.
The Listing standards of national stock exchanges
require that listed companies form at least three board
committees that must include:
1. Audit
2. Compensation
3. Nomination and Remuneration Committee
 Audit Committee

 Audit Committee is established by The

Commissioners to assist the board doing oversight to
the performance of the directors and management
according to CG principles.
 Audit Committee is established as the form of
obdience to Bapepam LK principles No. IX.I.5.
 Suaryana (2005) states that the audit committee is
tasked to assist the board of commissioners to
monitor the financial reporting process by
management to increase the credibility of financial
statements.
 The duties of the audit committee include reviewing
the accounting policies adopted by the company,
assessing internal control, reviewing the external
reporting system and compliance with regulations
 Comparison of Audit Committees

Prereforms Postreforms
Voluntary Audit commitees Mandatory formation of audit
committees
Personal and economic ties to Must establish procedures for receipt,
management and corporation retention, and treatment of complaints
relating to accounting, auditing, and
internal control matters
Liaison between management and Directly responsible for appointing,
independent auditors compensating, retaining, and
overseeing independent auditors
Limited knowledge of financial Financial expertise
reporting
Less accountability More Accountability
Lack of proper authority and resources Given appropriate funding, as
determined by the committee, for
external auditors and advisors
 The audit committee in the company deals with other
parties regarding the company's operations. Existing
conditions caused communication with various parties to
be carried out by the audit committee. The ability to
communicate well is needed by members of the audit
committee in carrying out their duties.
 In that case the audit needs to establish communication
with:
 board of Commissioners
 Management
 Internal auditors
 External auditors
 Audit Committees Task

 According to the attachment to the Decree of the

Chairman of Bapepam Number Kep-643 / BL / 2012
page 3, the duties and responsibilities of the Audit
Committee include: To review the financial
information that will be issued by the Issuer or
Public Company to the public and / or authorities,
including financial statements, projections and other
reports related to financial information of Issuers
and Public Companies;
1. Reviewing compliance with laws and regulations relating to the activities of the
Issuer or Public Company;
2. Providing an independent opinion in the event of disagreements between
management and the Accountant for the services provided;
3. Provide recommendations to the Board of Commissioners regarding the
appointment of an Accountant based on independence, the scope of the
assignment, and fees;
4. Reviewing the examination by the internal auditor and overseeing the
implementation of the follow-up by the Board of Directors on the findings of the
internal auditor;
5. Reviewing the implementation of risk management activities carried out by the
Directors, if the Issuer or Public Company does not have a risk monitoring
function under the Board of Commissioners;
6. Reviewing complaints relating to the accounting process and financial reporting
of Issuers or Public Companies;
7. Analyzing and giving advice to the Board of Commissioners related to the
potential conflict of interests of Issuers or Public Companies; and
8. Maintain the confidentiality of documents, data and information of Issuers or
Public Companies.
 Audit Principal

 Following are the audit committee principles derived

from various publications, rules and regulations:
 Independent
 Competence
 Commitment
 Compensation
 Accountability
 Independent
The audit committee must be independent or cannot
be influenced by the company's management and
other parties in carrying out their duties to realize
credibility in the eyes of the public and shareholders.
Which means, the audit committee must only consist
of independent directors.
 Competence
Competence relates to an adequate understanding of
the members of the audit committee including the
attributes that support the implementation of a clear
understanding of the difference between the
company's decision-making functions delegated to
management and the supervisory functions taken by
the audit committee; the duties of the audit
committee, which include : character that isn’t easy to
believe, has a curiosity, can think logically, and has the
ability to analyze problems
 Commitment
Commitment includes awareness of the
responsibilities that are owned and apply
professionalism in carrying out the tasks owned. The
audit committee's authority must be delegated by the
board of directors to carry out assigned oversight
responsibilities, including the authority to recruit,
compensate, and fire independent and internal
auditors, the authority to engage independent and
other advisors, and the authority to conduct
investigations as deemed necessary.
 Compensation
Audit committee members must be supported by an
adequate compensation package to maintain the
independence, objectivity and quality of their work.
Audit committees must also be given sufficient funds
for payment and compensation to independent
auditors, internal auditors (chief audit executive), legal
advisors, and other advisors.
 Accountability
The audit committee must ultimately be accountable
to the board of directors as representatives of all
stakeholders, especially shareholders. The committee
must report quarterly to the board of directors, and
annually to shareholders, about their activities,
achievements and performance. The audit committee
must also be evaluated annually to achieve its
objectives.
 Member Qualification

 Financial Expert
 Has the ability to asses the general application of such
principles in connection with accounting for estimates,
accruals, and reserves
 Experience preparing, auditing, analyzing, or evaluating
financial statements that present a breadth and level of
complexity of accounting issues that are generally
comparable to issues that can be raised by the
registrant’s financial statements
 An understanding of internal controls and prodecures for
financial reporting, and an understanding of audit
committee functions
 Audit Committee Responsibilities

Audit Committee oversight responsibilities can be

grouped into the following categories:
1. Corporate Governance. The audit committee, as
one of the important and influential participants in
corporate governance, must participate with other
board committees in overseeing the effectiveness of
corporate governance without assuming
managerial responsibilities
2. Internal Controls. The audit committee must oversee
the company's internal control structure to ensure the
efficiency and effectiveness of operations, the reliability
of financial reporting, and compliance with applicable
laws and regulations.
3. Financial Reporting. The audit committee must oversee
the financial reporting process by reviewing and
quarterly financial reports, including MD&A;
accounting principles, practices, estimates and
reserves; and suggestions, comments, adjustments and
entries of the independent auditor classification.
4. Audit Activities. The audit committee is responsible for
overseeing internal and external audit activities. The
committee has direct responsibility for recruiting,
compensating, and firing independent auditors and the
Chief Audit Executive (CAE) of the company.
5. Code of Ethics Conduct. The audit committee is
responsible for overseeing the establishment and
enforcement of the company's code of ethics to ensure
that the "Tone at the top" policy is implemented to
promote ethical behavior throughout the company.
6. Whistleblower Program. The audit committee is responsible
for overseeing the establishment and enforcement of the
whistleblower program in accordance with SOX and SEC
related rules. To effectively implement SOX provisions
relating to whistleblowers, public companies must establish
procedures that allow employees to anonymously report
suspected violations.
7. Enterprise Risk Management. The audit committee is
responsible for overseeing the company's risk management
and ensuring it is appropriate in identifying business events
and transactions, related risks, management risk tolerance,
and actions taken to monitor and minimize risks that
threaten the integrity of the financial statements.
 Compensation Committee

National stock exchange listing standards require that

the compensation committee consists of at least three
independent directors with the main responsibility for
determining compensation for directors and senior
executives. The committee must consist of all
independent directors who are rotated periodically,
have extensive knowledge, or are responsible for being
knowledgeable about compensation and related issues,
and can carry out due diligence and professional
judgment in carrying out the responsibilities assigned
to them.
 Compensation Committee Roles and Responsibilities

Best practice recommends that the compensation

committee ensures that the consultant is independent
of management and provides objective and relevant
advice to the committee; maintain and control all
aspects and conditions of e-consultant committee
relations, including appointment of consultants,
retention, dismissal, scope of work, and supervision
and monitoring of work; and allows, in rare cases,
consultants to provide limited services to
management, as long as the services are well disclosed
in their reports to the compensation committee.
The responsibilities of the compensation committee
can be generalized into four categories:
1. evaluating director performance,
2. evaluating executive performance,
3. designing and implementing compensation plans
for directors and executives, and
4. disclosing committee work.
 Corporate Governance Committee

The Corporate Governance Policy Committee duty is to

assist the Board of Commissioners in reviewing the overall
Good Corporate Governance (GCG) policy prepared by the
Directors and assessing the consistency of its application,
including those related to business ethics and corporate
social responsibility. Members of the Corporate
Governance Policy Committee consist of members of the
Board of Commissioners, but if necessary can also appoint
professional actors from outside the company. If deemed
necessary, the Corporate Governance Policy Committee
can be combined with the Nomination and Remuneration
Committee.
 Corporate Governance Committee Roles and
Responsibilities

The corporate governance committee must

(1) manage agendas and meetings with a focus on short-
term performance issues and short-term strategic,
(2) review past agendas and minutes of meetings to ensure
sufficient time and discussion is devoted to each issue,
(3) revise the agenda as needed and set priorities for the
meeting,
(4) ensure the topic of the agenda is supported by relevant
and timely documents, and (5) present briefing
material and supporting documents for the previous
board agenda.
 Nomination and Remuneration Committee

The Nomination and Remuneration Committee is tasked

with assisting the Board of Commissioners in determining
the criteria for selecting candidates for members of the
Board of Commissioners and Directors and the
remuneration system. The Nomination and Remuneration
Committee is also tasked with helping the Board of
Commissioners prepare candidates for the Board of
Commissioners and Directors and propose the amount of
remuneration. The Board of Commissioners may propose
the candidate and his remuneration to obtain the decision
of the General Meeting of Shareholders (GMS) in
accordance with the provisions of the Articles of
Association.
 Nomination and Remuneration Committee Roles and
Responsibilities

The nominating committee is responsible for:

(1) reviewing the current performance of the director;
(2) assesses the need for new directors;
(3) identifying and evaluating candidates' skills,
backgrounds, diversity, and knowledge;
(4) has an objective nominating process for qualified
candidates; and
(5) assist in the selection of qualified new directors.
 Selection, Nomination, and Electing Directors

 The candidates for directorship are normally introduced

at the annual meeting of shareholders. The shareholders
then vote to elect new directors who will assume the
responsibility of representing and protecting their
interest.

 The company's bylaws normally authorize the board to

fill the interim vacancies on the board for the remainder
of the unexpired terms, or until the next annual meeting
for shareholders. Directors' terms usually begin and
expire on the date of the annual meeting of shareholders
and are specified for one to three years. Once a director is
elected, the serving director often finishes the term,
unless he or she is otherwise removed or forced to resign.
 SUMMARY

New corporate governance reforms, complexity of

business, globalization, and technological advances have
encouraged the board to establish standing committees to
best use the expertise, knowledge, and efforts of its
directors. several standing committees of the board have
emerged; the most common being audit, nominating,
corporate governance, and compensation. Other
committees such as budget, finance, executive, outside, or
investment may also established by some companies.
Listing standards require companies to have audit,
nominating/governance, and compensation committees.
There has been increasing interest and demand for the
formation of a diligent audit committee during the past
several decades. An effective audit committee is an
essential component of corporate governance in improving
the company's financial reporting, internal control, and
audit functions. The oversight function of audit committees
has considerably expanded since the passage of SOX and
SEC-related implementation rules. Thus, audit committees
throughout the world are seeking guidelines and best
practice benchmarks to effectively fulfill their oversight
function in the areas of corporate governance, financial
reporting, internal control, audit function, and other
activities.