What is an audit committee?

Definition

An audit committee means a subcommittee of the board of directors responsible for overseeing financial reporting, audits, compliance, and risk management. It supports corporate governance by ensuring transparency, accountability, and integrity in how an organization manages its financial and operational risks.

What does an audit committee do?

The audit committee’s responsibilities typically include:

• Reviewing financial statements and accounting policies
• Overseeing internal and external audit functions
• Monitoring internal control systems
• Managing risk assessment and mitigation processes
• Ensuring compliance with laws and corporate policies
• Overseeing whistleblowing procedures and ethical concerns

These duties help protect stakeholders and support the board’s overall governance objectives.

Who are the members of an audit committee?

An audit committee is usually made up of independent, non-executive directors. Best practices recommend that at least one member is a financial expert, such as a CFO, accountant, or audit specialist. Members must be objective, skilled in oversight, and free from management responsibilities.

Who does the audit committee report to?

The audit committee reports directly to the board of directors. It provides updates on financial oversight, audit findings, risk assessments, and compliance matters. Its reporting responsibilities are typically outlined in the board’s committee charter.

What is the purpose of an audit committee?

The purpose of an audit committee is to:

• Promote financial transparency
• Support risk-aware decision-making
• Safeguard the integrity of audit processes
• Ensure legal and regulatory compliance
• Strengthen stakeholder trust through oversight

By serving as an independent checkpoint, the audit committee reinforces corporate governance across the organization.

Quick summary

• An audit committee means a board-level group that oversees audit, risk, and compliance
• It includes independent directors with financial expertise
• The committee reports to the board of directors and helps ensure integrity in decision-making
• Responsibilities range from financial reporting to internal controls and compliance monitoring

For a full breakdown of responsibilities, real-world examples, and regulatory requirements, read our in-depth guide to audit committees.

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