audit committee

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Audit Committee

A committee responsible for reviewing its own company's business activities to identify inefficiencies, reduce costs, and otherwise achieve organizational objectives. Audit committees may investigate potential theft or fraud and ensure compliance with applicable regulations and policies. They also assist in risk management. In a large company, especially a publicly traded one, the audit committee is independent from any management and is answerable only to the board of directors. See also: Internal audit.

audit committee

A subcommittee of a corporation's board of directors that selects the firm's external auditors. The audit committee is responsible for hiring the auditors, resolving disputes with the auditors, and evaluating and disclosing the auditors' reports.

Audit committee.

The corporate audit committee is the liaison between the company's management, the board of directors, internal and external auditors, and any other accounting experts advising the company on audit issues.

In particular, the audit committee is responsible for hiring and managing external auditors. Since 2002, when Congress passed the Sarbanes-Oxley Act, implementing stringent financial oversight regulations, the role of the audit committee has become increasingly important.

An audit committee is composed of a subgroups from the corporation's board of directors. Members of the audit committee must be independent, which means they have no ties to the company's management team.

In general, they cannot receive any compensation, such as consulting or advisory fees, except for a board of director's fee. They may not be able to own shares in the company or be affiliated in any other way with the company. Nor can they be affiliated with or have an interest in the external auditing company.

References in periodicals archive ?
I was one of eight members of The Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees, established by the NYSE and the National Association of Securities Dealers to review possible changes in listing requirements.
Titled "Improving Audit Committee Performance: What Works Best," the study outlines how to address the areas of greatest concern for audit committees today and also discusses where the most pressing future challenges are developing.
A must-have for all audit committee members, board directors, corporate secretaries, CEOs, CFOs, and auditors involved in the accounting practices of their firms, The Audit Committee Handbook, Fifth Edition is the most authoritative work on audit committees in the marketplace.
One result of the accounting scandals of recent years is the enormous attention given to audit committees of public companies and the subsequent change in the committee's role and practices.
So how can audit committees address the risk of management override of internal controls as part of their oversight of the financial reporting process?
Projects that the AICPA Foundation helped fund during the past year include two new television programs that teach middle and high school students about personal finance and the accounting profession; "Financial Smarts for Teachers," which helps instructors understand their own finances; a disaster recovery guide, which was produced in conjunction with the National Endowment for Financial Education and the AICPA; and the Audit Committee Effectiveness Toolkit, a broad sampling of checklists, questions, reports and guidelines that help audit committees achieve best practices.
In this regard audit committees are looking closely at the types of services the outside auditor provides and, as required by Sarbanes-Oxley, preapproving all such services.
AUDIT COMMITTEES of public companies are trying their best to adjust to the Sarbanes-Oxley Act of 2002, related SEC rules, and the increased focus by shareholders, corporate governance rating groups, and others on audit committee oversight.
The responsibilities of corporate audit committees are increasing in both number and complexity.
Written for seasoned professionals as well as newly assigned board members, Audit Committee Essentials is a vital tool in order to stay abreast of the rapidly changing governance requirements and responsibilities of audit committees.
Now, as many public companies are moving to a "sustaining" or maintenance mode, audit committees are becoming increasingly concerned with escalating audit fees.
Table 2 indicates the number of members on audit committees as disclosed in the proxy statement.

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