Question

Internal Controls

Examine the importance of the audit committee oversight related to the quality of the internal controls of an organization. Analyze the audit committee’s responsibilities regarding risk assessment and internal control monitoring. Indicate whether the audit committee is the best entity to perform the function.

Contrast the opinion provided by the independent auditor concerning management’s assessment of internal controls over the financial reporting system with the audit opinion on the financial statements in general. Argue for providing both a qualified opinion over the financial reporting system and an unqualified opinion on the financial statements.

Answer 1

The main purpose of an audit committee in a company is to provide oversight of the audit process, financial reporting process, the internal controls of a company and compliance as per laws and regulations. The audit committee must be “tuned-in” to the tone-at-the-top of the company as an initial indicator of the internal control system functioning. It oversight responsibilities and roles is for improving internal control, sound corporate financial reporting, rules compliance, and auditing processes. When an internal audit function exists in the company, the committee will review as well as approve the plan of audit, review staffing and company of the function, and meet with management and internal auditors on a periodic basis for discussing the matters of concern that may arise.

In my opinion the audit committee is the best entity to perform the risk assessment and internal control monitoring. The review on the internal information provides audit committees an opportunity to ask queries in regard to the accuracy, completeness, and timeliness on reports of audit. An efficient audit committee is an important process for investor's protection and the health of the capital markets.