What is a central responsibility of the audit committee in a public company quizlet?
The role of the audit committee forms the cornerstone for effective corporate governance. Boards rely on their audit committees to offer effective oversight of the annual auditing process. Members of the audit committee do their best quality work when most members are independent and objective. Regardless of their experience, nearly all audit committees have room to improve the financial reporting process. Effective audit committee oversight is vital for protecting investors and the health of the capital markets. Show
Audit committees also oversee the system of internal controls and ensure that the company complies with laws and regulations. Audit committee oversight extends to IT security and operational matters, including audit management software. Certified public accountants report directly to the audit committee, as opposed to reporting to management. The role of the audit committee includes such responsibilities as appointing and overseeing the work of the auditor and managing the auditor’s compensation. What Is the Role of the Audit Committee?An audit committee is appointed by the board and is composed of between three and seven board directors who aren’t part of the corporation’s management. Their basic responsibility is helping independent auditors oversee the corporation’s financial reporting system in a process independent of management. They achieve this in the following ways:
Who Makes Up the Audit Committee?Audit committees should have at least one individual on the committee who is considered a financial expert. The audit committee chair should be a certified public accountant (CPA) or otherwise considered a financial expert; however, it’s not necessary for all members of the committee to be financial professionals. For companies operating under the Sarbanes-Oxley Act, the Act requires corporations to appoint only independent members to the audit committee. The Act also requires companies to disclose whether they have appointed at least one financial expert to the audit committee. Best practices also provide guidance for the composition of audit committees. Boards should appoint at least one member who has recent and relevant financial experience. The Audit Committee and Corporate GovernanceThe audit committee plays a vital role in corporate governance because they hold the board and the organization accountable in almost every area, from internal and external audits to financial and risk management. The audit committee and management must maintain the internal controls and governance that ensure that the financial reporting process is accurate and effective. Before the audit committee begins its work, committee members must understand how management develops and reports internal financial information. Having a good understanding of audit reports ensures that audit committee members will know the potential impact of financial statements and how they interact with compliance and risk management. All audit committee members must also be up to speed on recent professional and regulatory changes and announcements to maintain the appropriate controls throughout the audit process. The audit process is interactive between the audit committee, auditors and management. Audit committees review the audit results with senior managers and external auditors, including matters managers generally share with the audit committee under general auditing standards. One of the primary responsibilities of the audit committee is to review significant accounting and reporting issues, and recommend solutions that maintain the organization’s regulatory compliance. Corporate governance relies on the audit committee because audit teams are often the first line of defense in financial reporting. They can both uncover risks through internal and external audits, as well as recommend fixes that are both in line with the organization’s governance and with broader industry regulations. Benefits of an Independent Audit CommitteeRegulations often require organizations to have an audit committee that can act independently. But having a committee independent from management also allows the committee to more freely express opinions and act in the best interest of shareholders. _________________________What Are the Features of the Most Powerful Audit Management Software?_________________________Responsibilities of the Audit CommitteeWhile the audit committee is responsible for performing the audit, they are also responsible for other essential tasks relative to the audit and the corporation’s internal control system. Audit committee responsibilities encompass many oversight responsibilities, including fraud prevention, ethics and compliance, oversight of the independent auditor and involvement with external communications. Additional functions of an audit committee include:
Audit committee members are responsible for performing a wide variety of duties, working closely with a wide variety of stakeholders. Financial regulations are also evolving, especially during these volatile economic times. Audit committees should stay current with financial trends, global risk reports, and new or evolving legal or regulatory requirements. This is all to ensure that the company has sound financial reporting practices and robust internal controls. How Chief Audit Executives Can Support Today’s Audit CommitteesAudit committees are responsible for so much more than annual reports. The varied role of the audit committee requires them to address a wide range of challenges, from diversity, equity, and inclusion to access to talent. Their ongoing activities can strengthen compliance and bolster good governance, but only with the support from effective chief audit executives (CAE). CAEs champion internal audits for management and the board, creating a culture that encourages internal audits to lead with strategic insights. Proactively identifying risks is a good start, but modern internal audit teams also need to have a true partner to the Chief Audit Executive to embrace challenges and strengthen the organization’s competitive edge. Read more about the five ways CAEs can keep pace with their internal audit teams. What is a central responsibility of the audit committee in a public company?The primary purpose of a company's audit committee is to provide oversight of the financial reporting process, the audit process, the company's system of internal controls and compliance with laws and regulations.
What is an audit committee and what are its responsibilities quizlet?Audit committee. A committee consisting of members of the board of directors, charged with overseeing the entity's system of internal control over financial reporting, internal and external auditors, and the financial reporting process. Member typically must be independent of management.
What is the governance role of an auditor in a public company?The role of an external auditor is crucial in achieving the objective of corporate governance. The external auditors are responsible for auditing the company's financial statement and providing reasonable assurance that they are presented fairly in conformity with the required standards.
What is the responsibility of the audit committee of the board of directors?An audit committee is one of the major operating committees of a company's board of directors that is in charge of overseeing financial reporting and disclosure.
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