The State Audit Institution (DRI) conducted an audit of the effectiveness of audit committees in which the state has majority ownership and which determined that their work is not effective, which is why one of the recommendations to the relevant Ministry of Finance and Social Welfare is to amend and supplement the law on audit as soon as possible. in order to regulate numerous issues about the work of these committees.
According to the Law on Auditing, the audit committee of a company is responsible for monitoring the financial reporting process, auditing annual reports, making recommendations to the shareholders' meeting on the selection of authorized auditors, considering plans and annual internal control reports...
SAI assessed that in four companies no audit committee was formed, in 11 the work of the audit committee is not effective, in four companies the work of the board is partially effective and in four they have effective work of the audit committee with the need for additional improvements
Inefficiency has been noted in the work of these committees for years, and they were mainly used to collect significant fees from individuals, which ranged, as stated by the former Ministry of Finance, led by Minister Darko Radunović, from 100 to 600 euros on a monthly basis, and it happened and that individuals were on several boards of those companies.
The analysis of the former ministry from March 2020 showed that in the majority of state-owned companies, no representative of the majority owner - the state - was appointed to the audit committee, and that in some companies, the heads of state bodies or members of individual management boards were appointed as members of that body.
The DRI audit covered the period from January 2018 to January 2021, and they were audited - Institute for Ferrous Metallurgy, Monteput, Radio Diffusion Center, Barska plovidba, Railway Transport of Montenegro, Montenegro Bonus, Montekargo, Marina Bar, Luka Bar , Railway infrastructure, Budva Riviera, Coal mine, Montenegrin navigation, Montenegrin electric transmission system, Montenegrin electric distribution system, Electric industry, Maintenance of railway rolling stock.
SAI assessed that no audit committee was formed at four companies, at 11 the work of the audit committee is not effective, at four companies the work of the board is partially effective and at four they have an effective work of the audit committee with the need for additional improvements.
The audit was led by Senator Branislav Radulović, while the other member of the collegium was Senate member Zoran Jelić.
SAI determined that the statute of a number of companies does not specify which body is responsible for appointing the audit committee, so it was recommended that this be corrected.
"The largest number of audit committees (14 out of 17) adopted rules of procedure for their work, however, in a certain number of cases, they do not prescribe the obligation to report to the board of directors. In the case of 70 percent of the audited companies, the audit committees did not report to the management body. In addition, in half of the controlled boards, the chairman of the board did not have the obligation to inform the governing body about the board's conclusions from each session," the audit stated.
Only two audit committees, out of a total of 17 included in the audit, adopted an annual work plan, which had a negative impact, stated the SAI, on the effectiveness of the work of the audit committees.
It was recommended to the Ministry of Finance to propose to the Government amendments to the Law on Auditing in order to more fully standardize competences, ways of functioning, election and recall of board members and other matters of importance for the work of audit boards, as well as to monitor the reporting process by audit boards.
"The Audit Act prescribes only the mandatory appointment of audit committees, their composition and competences, without further elaboration, i.e. regulation of other important issues, which due to lack of regulation produce either different internal regulation and application or are not regulated at all by the acts of these companies. That is why we have that issues such as the mandate of the members of the audit committee, management reporting, the way the meeting is conducted, the quorum, the majority for voting, compensation for the work of the board and other issues, remained within the scope of the company's internal acts, which either did not regulate these issues or were inadequate arranged", Radulović explained to "Vijesta".
He also said that it is necessary to regulate the way in which the Assembly of Shareholders or another competent authority that conducts the election can, by its decision, recall a member of the audit committee before the expiration of his mandate, determine the reasons for the recall, and standardize the competences and election of the chairman of the board.
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