In the Ghanaian context, the Code of Best Practices in Corporate Governance primarily refers to the Securities and Exchange Commission’s (SEC) Corporate Governance Code for Listed Companies 2020, which outlines requirements for audit committees. However, for regulated financial institutions like savings and loans companies, the Bank of Ghana’s (BoG) Corporate Governance Directive 2018 takes precedence, aligning with the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930). This directive emphasizes strong governance to prevent issues seen in the 2017-2019 banking cleanup, where weak audit oversight contributed to failures like UT Bank. The audit committee plays a critical role in ensuring transparency, compliance, and risk management, integrating into modern banking practices for resilience and ethical operations, as seen in post-DDEP recovery efforts where robust committees helped institutions like Access Bank Ghana maintain stability.

A. Five Functions of the Audit Committee

The functions below are drawn from the BoG Corporate Governance Directive 2018, which mandates audit committees for institutions like savings and loans to oversee financial integrity and risk. Each function is explained with practical insights:

1. Overseeing the Financial Reporting Process: The committee reviews the establishment of accounting policies and practices, ensuring the accuracy and integrity of quarterly and year-end financial statements. In practice, this involves scrutinizing adjustments, compliance with IFRS, and the going concern assumption. For example, during the 2022-2024 DDEP, audit committees at Ghanaian banks like GCB Bank ensured transparent reporting of restructured bonds, preventing misrepresentation and maintaining investor confidence.
2. Providing Oversight of Internal and External Audit Functions: The committee monitors the effectiveness of both internal and external audits, including reviewing audit scopes, frequencies, and reports. This ensures impartiality and proficiency in audits. A real-world application is seen in Stanbic Bank Ghana, where the audit committee’s oversight during the 2019 cleanup helped identify internal control weaknesses early, aligning with BoG’s operational risk standards under Basel II/III adaptations.
3. Handling Appointment, Compensation, and Removal of Auditors: The committee recommends the appointment or dismissal of external auditors, sets their fees, and ensures independence. This function mitigates conflicts of interest, as required by BoG directives. In cases like the Capital Bank collapse, inadequate auditor independence highlighted the need for this; effective committees, as in Ecobank Ghana, use this to select auditors with no ties to management, enhancing audit quality.
4. Reviewing Audit Reports and Ensuring Corrective Actions: The committee receives key audit reports and ensures senior management addresses control weaknesses, non-compliance, or other issues promptly. This includes documenting actions on recommendations. Post-2018 directive, this has been crucial for fintech integrations under the Payment Systems and Services Act, 2019 (Act 987), where committees at institutions like MTN Mobile Money’s partners review cyber risks per the Cyber and Information Security Directive 2020.
5. Overseeing Compliance and Risk Management: The committee assesses internal controls, risk management systems, and regulatory compliance, reporting to the board on these matters. In Ghana’s sustainable banking push, committees evaluate environmental and social risks per BoG’s principles, as seen in Barclays (now Absa) Ghana’s practices, ensuring alignment with liquidity and capital requirements under the Capital Requirements Directive.

B. Recommendation on Composition of the Audit Committee for RGB Savings and Loans Limited

As a consultant with over 20 years in Ghanaian banking, I recommend the following composition for RGB Savings and Loans Limited’s Audit Committee, based on the BoG Corporate Governance Directive 2018 (Section 54 and Appendix C). This ensures compliance, independence, and expertise, critical for BoG approval and operational resilience in a post-cleanup era where governance lapses led to revocations. The committee should be established via board resolution, with terms of reference approved annually.

• Number of Members: At least three (3) members to allow for quorum and diverse input, as is standard in BoG-regulated institutions. This size is efficient for a savings and loans company, avoiding bureaucracy while enabling thorough deliberations.
• Type of Directors: All members must be non-executive directors to maintain objectivity and avoid conflicts from operational involvement. A majority (at least two out of three) should be independent directors, free from material relationships with the company, as defined in the directive (e.g., no recent employment or significant shareholding).
• Chairperson: The chairperson must be an independent non-executive director with competence in accounting, auditing, or finance (e.g., a Chartered Accountant). They cannot chair the board or any other committee to prevent concentration of power, aligning with BoG’s emphasis on separation of roles for ethical practices.
• Expertise Requirements: All members should possess broad competence in accounting, auditing, finance, and relevant business knowledge. At least one member (preferably the chair) must have recent and relevant financial expertise, such as ICA Ghana membership or equivalent, to oversee complex reporting under IFRS and BoG guidelines like the Liquidity Risk Management Guidelines.
• Additional Considerations: Members should be selected for objectivity, with no conflicts (e.g., no family ties to executives). Diversity in gender and skills (e.g., including risk or IT experts per the 2020 Cyber Directive) is encouraged for bonus resilience. Tenure should be staggered for continuity, with annual performance reviews. For RGB, as a smaller SDI, source independent members from external professionals if needed, ensuring BoG vetting for fit-and-proper status under Act 930.

This composition supports profitability by mitigating risks, as evidenced by successful recapitalizations at institutions like Fidelity Bank post-2018 directive. Implement within three months for compliance, with training on BoG’s sustainable principles.