You work for a mid-sized audit firm, Green & Co. One of your clients, Wedford Ltd, recently established an audit committee in compliance with the Australian Securities Exchange listing requirements. The committee is made up of Francis Carton, Jo Pashtoon and Charles Digson.

Francis is an executive of the company and has worked his way up from a factory worker through to management. Francis is the chairperson of the audit committee.

Jo is not a member of management and is therefore a non-executive director, but she does serve on a number of other boards. Jo's background is in accounting and before she became a director she was the CFO of a large corporation for many years.

Charles is the chairperson of the board of directors and is an executive of the company. Charles'

background is in manufacturing and he has been with Wedford Ltd for 5 years.

The committee has drafted a charter which details its rights and responsibilities. This will include the committee's interactions with the newly formed internal audit department. The board would like to discuss with you the relationship between your firm as external auditors, the internal audit team and the audit committee.

Required

Prepare a report for the board, covering the following matters:

a. Outline the objectives of an audit committee.

b. Discuss the interaction between the audit committee and both the internal and external audit functions.

c. Identify the strengths and weaknesses of Wedford Ltd's audit committee.

d. Recommend terms of reference for the committee.