I noted a direct correlation between the overall effectiveness of an audit committee and the extent to which its charter reflected best practices. If an audit committee didn't have a charter, or had a very limited charter, its members often were ineffective. That charter provides the basis for the sample shown in exhibit 4 . Most of that advice is not specific to banking institutions but is applicable to all audit committee charters. Of course, this one model is not a perfect fit in all situations.
Many features have to be customized to fit the particular situation at an organization.
A board of directors often will seek the advice of consultants or lawyers when it develops a new charter or revises an existing one. To meet its fiduciary responsibilities, it is best to approve the charter formally, review it periodically and revise it as necessary when conditions change. The audit committee may find a record of the deliberations leading to the final document helpful, especially if disagreements about interpretation arise.