Audit Committee Role and Responsibilities Toolkit
Resources relating to a corporate audit committee and its duties.
Reporting companies that are listed on a national securities exchange should have an audit committee. The audit committee is a committee of the board of directors to which the board delegates its responsibilities for oversight of the company's financial reporting, audit functions and internal control over financial reporting. The audit committee plays a critical role in providing oversight over and serving as a check and balance on a company's financial reporting system.
The SEC and the national securities exchanges impose requirements for the composition, activities and obligations of an audit committee. If a company chooses not to form an audit committee, the entire board of directors is considered to constitute the audit committee. In that case, the regulations and listing standards relating to the audit committee are applicable to the full board of directors.
Some of the key duties of an audit committee imposed by SEC regulation or securities exchange listing standards include:
Appointment, retention and oversight of the company's independent auditors.
Review of a company's financial information, including:
its financial statements;
management's discussion and analysis of financial conditions and results of operations disclosure; and
earnings releases and any financial information or earnings report given to financial analysts and credit rating agencies.
Oversight of the company's risk assessment and management policies.
Creation and monitoring of whistleblower procedures to submit anonymously complaints about the company's accounting policies and practices and internal control over financial reporting.
Other responsibilities assumed by an audit committee as a matter of good practice include:
Oversight of compliance programs.
Monitoring the company's code of conduct.
Review of related party transactions.
The Audit Committee Role and Responsibilities Toolkit provides several continuously maintained resources that describe and discuss the governance standards for and duties of an audit committee.