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 ?
The Board of the International Organization of Securities Commissions (IOSCO) today published the Survey Report on Audit Committee Oversight of Auditors, which seeks to help identify audit committee practices that could improve audit quality at publicly listed entities.
The mainstay of the paper is formed by an analysis of the determinants and consequences of audit committee effectiveness, the contribution of ACs to improvements in the quality of accounting information, and ACs as part of corporate governance.
The Sarbanes-Oxley Act of 2002 (SOX) defines an audit committee as "a committee (or equivalent body) established by and amongst the board of directors of an issuer for the purpose of overseeing the accounting and financial reporting processes of the issuer and audits of the financial statements of the issuer.
The chair of the audit committee has the important role of providing leadership for the audit committee and of exercising powers on behalf of the committee previously reserved to management.
Also, 23% of audit committee chairs are accountants, up from less than 10% in 2002.
This article will examine the new vision of the public-sector audit committee incorporated in the new recommended practice.
Boards: Currently a member of the board and chairman of the audit committee of Fannie Mae, Kimberly-Clark Corp.
The external auditor's section 404 responsibility is to critically evaluate the design and effectiveness of management's internal controls over financial reporting, test as necessary, form an opinion and communicate significant deficiencies and material weaknesses to management and the audit committee.
The independent audit committee provides oversight of the financial reporting process while the independent auditor provides an outside opinion on the fairness of the financial statements.
Audit committee members with knowledge of accounting issues and their related business ramifications translates into a higher stock price, according to a recent study by a University of Chicago researcher.
However, a registered public accounting firm may engage in nonaudit services other than those listed above (including tax services), for an audit client, provided such activity is first approved by the issuer's audit committee.

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