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Audit CommitteeAn Audit Committee is an operating committee of a publicly-held company. Committee members are normally drawn from members of the Company's Board of Directors. An Audit Committee usually has a number of Independent or Outside Directors. Responsibilities: - Oversee the financial reporting process.
- Monitor choice of accounting policies and principles.
- Monitor internal control process.
- Oversee hiring and performance of the external auditors.
The United States' SEC first recommended that publicly held companies establish audit committees in 1972. The stock exchanges quickly followed by either requiring or recommending that companies establish audit committees. Over the years, various initiatives to strengthen and increase the responsibilities of audit committees have been made. In 2002, the Sarbanes-Oxley Act increased audit committees responsibilities and authority, and raised membership requirements and committee composition to include more independent directors. In response, the SEC and the stock exchanges proposed new regulations and rules to strengthen audit committees.
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