An audit committee is a sub-committee of an organisation’s board of directors charged with overseeing financial reporting, internal controls, risk management, and the relationship with internal and external auditors. Composed primarily of independent non-executive directors, it provides assurance to the board and stakeholders on the integrity of financial statements and the effectiveness of control systems. The committee is a central pillar of corporate governance and regulatory compliance regimes.
Overview
- Typically composed of independent non-executive directors with financial literacy.
- Engages and evaluates both internal audit and the external auditor.
- Mandated by governance codes and securities regulation in many jurisdictions.
Key aspects
- Oversight of the integrity of financial statements.
- Review of internal control and risk-management effectiveness.
- Auditor independence, appointment, and remuneration.
- Whistleblowing arrangements and regulatory compliance monitoring.
Applications
- Listed-company governance and financial assurance.
- Public-sector and charity oversight bodies.
- Bank and insurer prudential governance.
- Investor confidence and capital-market integrity.