to the committee on a variety of matters, such as their views on management's selection of accounting principles, accounting adjustments arising from their audits, any disagreement or difficulties encountered in working with management, and any identified fraud or illegal acts. Role in oversight of the external auditor Audit committees typically approve selection of the external auditor. The external auditor (also called a public accounting firm) reviews the entity's financial statements quarterly, audits the entity's financial statements annually, and issues an opinion providing assurance on the entity's annual financial statements. Changing an external auditor typically also requires audit committee approval. Audit committees also help ensure the external auditor is independent, meaning no conflicts of interest exist that might interfere with the auditor's ability to issue its opinion on the financial statements. European Union: Directive 2006/43/EC, article 41.3 and 41.4: "In a public-interest entity, the proposal of the administrative or supervisory body for the appointment of a statutory auditor or audit firm shall be based on a recommendation made by the audit committee. The statutory auditor or audit firm shall report to the audit committee on key matters arising from the statutory audit, and in particular on material weaknesses in internal control in relation to the financial reporting process." Role in oversight of regulatory compliance Audit committees discuss litigation or regulatory compliance risks with management, generally via briefings or reports of the General Counsel, the top lawyer in the organisation. Larger corporations may also have a Chief Compliance Officer or Ethics Officer that report incidents or risks related to the entity's code of conduct. Role in monitoring the effectiveness of the internal control process and of the internal audit Internal control includes the policies and practices used to control the operations, accounting, and regulatory compliance of the entity. Management and both the internal auditing function and external auditors provide reporting to the audit committee regarding the effectiveness and efficiency of internal control. IIA Practice Advisory: Cf. PA1110-1 paragraphs 2 and 3 (where the “board” means “an organization's governing body, such as a board of directors, supervisory board, (...) any other designated body of the organization, including the audit committee to whom the chief audit executive may functionally report) European best practice for the role of the Audit Committee in overseeing internal audit. Role in oversight of risk management Organizations have a variety of functions that perform activities to understand and address risks