Auditing - What is Audit Committee? Introduction and Constitution

Audit committee, in the actual corporate world, has been existed for number of years and the perception involving its roles and obligations are evolved time-by-time. This post aims to help highlight roles and obligations of audit committee during the past and recent years.

There were varied opinions on audit committee’s roles and responsibility in america and European Union—which then followed by all of those other countries

—before 2000s, but a certain consensus has emerged recently following the promotion involving audit committee function inside corporate governance by industry regulators and professional physiques. 

What is Audit Committee?

In brief words, audit committee can be defined as a group of bare minimum 3 persons who manage quality and integrity from the company’s accounting and Financial Reporting practices.

Searching offline and also online auditing literature, it's possible to find various descriptions about audit committee. A common term consistently appeared one of many descriptions is the “oversight accountability. ” Because of this specific oversight responsibility, audit committee members has to be independent with no connection to company management.

Therefore, within longer words, an audit committee can be defined as a group of bare minimum 3 independent directors without having connection to the business management, which are an operating part of the board of owners, with responsibility for internal controls and financial exposure oversight.

In the authentic corporate world, an audit committee usually invites members of management or others to Adhoc-committee meetings and even to partake of in on the deliberations. On the other hand, any such invited outside guests are not full voting members. As well as the roles of the committee is really a lot more than overseeing financial reporting practices, depending on sizes from the company, such as: legal and regulatory compliance; risk management, corporate governance practices.