In 2014, it was agreed Euro-IX would no longer use external auditors and instead ask for a group of members to come together to form an audit committee. Since then the Euro-IX accounts have been prepared by an external accountant and they have then been reviewed by an audit committee within a set of guidelines.
In 2022, these guidelines were critically reviewed to ensure that the output of the process is well defined and to then ensure that the process itself will deliver that output.
It should be noted that in 2014, one of the concerns was the drain on Member funds that the external audit process created. Since then, Euro-IX now comprises two entities – the UK and the Dutch companies – and so an external audit process would be more expensive.
Legal Structure
Euro-IX is a member owned and not for profit company. Its Board of Directors (Executive Committee) are elected of and by the membership during the company’s AGMs. The Board delegated the day to day operations of the association to a secretariat which is run by a Managing Director (MD) and other support staff as required. The MD reports to the Board. The Board are ultimately responsible for the preparation of the financial statements.
The formal legal basis for the Audit Committee is Euro-IX’s Articles of Association:
Each year the general meeting shall appoint from amongst the members a committee of at least two persons, who are not allowed to be Members of the Executive Committee. The committee shall audit the account rendered by the Executive Committee and shall report its findings on the subject to the general meeting.
The purpose of the Audit Committee is therefore to review the financial statements so as to provide the Members with reasonable assurance that the financial statements are free of material misstatements and so provide a true and fair view. If the Audit Committee cannot provide such reasonable assurance then they should state that instead.
The Audit Committee must carry out its work in a manner independent of the staff and Board of the association.
Audit Committee Selection
Per the Articles of Association, volunteers will be sought each year using the following process.
The work of the audit committee is dependent on the financial / accounting backgrounds and skills of the volunteers. Ideally those volunteering would have some experience in this area.
The existing Audit Committee will be polled to see if each member is willing to continue in their role.
During each year the Secretariat will seek volunteers ensuring that the Audit Committee has at least two members and no more than four members.
Should there be more than four volunteers, an election will take place during the last forum in the year, by putting all the names in a hat and asking a neutral person to pick the four member audit committee.
If no vote is held, the Audit Committee team should be properly appointed by the membership in a vote during the final Forum of the year.
Eligibility for membership of the Audit Committee is any nominated representative from Euro-IX’s membership.
The Audit
The audit will be carried out during the first quarter of each year, and the audit committee are expected to:
Take responsibility for conducting an annual review of the draft annual accounts of the association.
Publish an annual report to members, giving reasonable assurance that the financial statements are free of material misstatements and so provide a true and fair view. Or to decline to provide that assertion and report that to the members.
With the Board or MD’s approval, engage external expertise if necessary.
Conduct these activities in a manner independent of the staff and Board of the association.
Act with professional scepticism – Euro-IX is a small association where many people know others very well. In a financial review, the role of the Audit Committee is not to accept the numbers provided but rather to confirm them.
Acknowledge to the secretariat and the rest of the audit committee once they are happy with the report.
One member of the audit committee should report their findings at the following General Meeting.
Act in an ethical and professional manner. The Audit Committee will have access to sensitive financial information and must keep this confidential.
A separate document will be maintained by the Audit Committee detailing the process of the review and explaining how each element of the financial statements should be checked.
The audit itself is to provide reasonable assurance around the financial statements presented in the Annual Report. It is not an audit of Board spending policies; individual’s expenses or the expense policy; any tendering processes; value for money reviews; etc. These are all be competencies of the Board itself.
Review Documents Provided
Review documents to be provided by the Euro-IX Secretariat and/or Board will include:
The draft Annual Report in Word format;
The draft financial statements from the accountant (which will include the Statement of Profit and Loss and Other Comprehensive Income; the Statement of Financial Position; the Statement of Cash Flow; and any draft disclosure notes to the statements for both entities and the consolidated version);
Bank statements, credit card statements, etc. covering the full financial period;
Read-only access to the account system for at least one member of the Audit Committee;
Any other information required or requested by the Audit Committee such as invoices, letters of authorisation for independent verification of member / supplier balances, etc.
