Audit committee (AC)
Definition
An audit committee (AC) is a subset of a company's board of directors responsible for overseeing financial reporting and disclosure. It ensures the integrity of financial statements and compliance with legal and regulatory requirements.
5 Must Know Facts For Your Next Test
- The AC is typically composed of independent, non-executive board members.
- It plays a crucial role in selecting and interacting with the external auditor.
- The AC reviews internal controls and risk management processes.
- It ensures that the company's financial practices adhere to ethical standards.
- The Sarbanes-Oxley Act mandates the establishment of an AC for public companies in the U.S.
Review Questions
- What are the primary responsibilities of an audit committee?
- Why is independence important for members of the audit committee?
- How does the Sarbanes-Oxley Act impact audit committees?
"Audit committee (AC)" appears in:
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Related terms
Board of Directors: The governing body elected by shareholders to oversee the management and operation of a company.
External Auditor: An independent entity that examines the financial statements prepared by a company to ensure accuracy and compliance.
Internal Controls: Processes implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.
