Audit Committee
Audit Committee
The audit committee is a committee of the board of directors responsible for overseeing the company’s external audits and internal controls. The primary responsibilities of the audit committee include:
1. Overseeing the External Audit:* Appointing and overseeing the independent auditor.* Reviewing the auditor’s report and any other audit-related communications.* Discussing audit findings with the auditor and management.* Approving the auditor’s fees and expenses.
2. Assessing Internal Controls:* Reviewing and evaluating the company’s internal controls over financial reporting.* Assessing the effectiveness of the company’s internal controls.* Identifying any control weaknesses or risks.
3. Monitoring Management’s Response:* Reviewing management’s response to audit findings and internal control weaknesses.* Assessing the effectiveness of management’s corrective actions.* Ensuring that management is taking appropriate steps to address any issues.
4. Reporting to the Board:* Reporting the audit committee’s findings and recommendations to the board of directors.* Providing the board with any necessary information or assistance.
5. Maintaining Independence:* Ensuring that the audit committee members are independent from management and the auditor.* Disclosing any potential conflicts of interest.
6. Meeting Regularly:* Meeting regularly with the auditor, management, and other relevant parties.* Maintaining a clear and open communication channel.
7. Continuing Education:* Requiring members to obtain continuing education credits in accounting, auditing, and financial reporting.
8. Audit Committee Charter:* Establishing a formal charter that outlines the committee’s responsibilities, membership requirements, and operating procedures.
Common Members:
- Independent directors
- Audit committee chair (usually a non-executive director)
- Chief executive officer
- Chief financial officer
- External auditor
Additional Responsibilities:
- Reviewing and approving the company’s financial statements.
- Overseeing the company’s internal audit function.
- Engaging with external auditors and management on any issues related to the audit.