Question

In: Accounting

Why is an active board of directors audit committee important to an organization?

Why is an active board of directors audit committee important to an organization?  

Solutions

Expert Solution

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. For instance, they might serve as a sounding board for employees who observe suspicious behavior or spot fraudulent activities. In general, they become an independent guardian of the entity’s assets by whatever means is appropriate. Corporate frauds often have some relationship to audit committee failures. These include lack of independence of audit committee members, lack of experienced members on the audit committee, inactive audit committees, and the total absence of an audit committee.


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