What is the role of the audit committee of the board of directors?

Expert Solution

The audit committee of the board of directors of publicly traded companies is a subcommittee that has special responsibilities regarding audits.The audit committee is usually composed of three people who should be outsiders (not associated with the families of executive management nor former officers, etc.). With the advent of the Sarbanes-Oxley Act, at least one member of the audit committee must be a “financial expert.” The audit committee serves as an independent “check and balance” for the internal audit function and liaison with external auditors. SOX mandates that external auditors now report to the audit committee, which hires and fires auditors and resolves disputes. To be effective, the audit committee must be willing to challenge the internal auditors (or the entity performing that function) as well as management when necessary. Part of the role of committee members is to look for ways to identify risk. In general, they become an independent guardian of the entity’s assets by whatever means is appropriate.

In general, they become an independent guardian of the entity’s assets by whatever means is appropriate.

Junaid answered 10 months ago

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