how an audit committee works
the audit committee works closely with auditors to ensure that company s books are correct and that no conflicts of interest exist between auditors or any outside consulting firms employed by the company ideally the chair of the audit committee will be a certified public accountant cpa often however a cpa is not available for the audit committee let alone a member of the board of directors the new york stock exchange nyse requires that the audit committee include a financial expert but this qualification is typically met by a retired banker even though that person s ability to catch fraud may be less than expert the audit committee should meet at least four times a year in order to review the most recent audit either in person or via teleconferencing an additional meeting should be held if other issues need to be addressed 2 audit committees maintain communication with the company s chief financial officer cfo and controller the committee has the authority to initiate special investigations in cases where it is determined that accounting practices are problematic or suspect or when serious issues arise with employees an internal auditor would assist the committee in such efforts the audit committee s role includes the oversight of financial reporting the monitoring of accounting policies the oversight of any external auditors regulatory compliance and the discussion of risk management policies with management the duties and composition of a company s audit committee can be found in sec form def 14a or proxy statement 1 committee members may change from time to time depending on the movement of personnel on or off the board or change of committee assignments aside from annual compensation for directors those who serve on an audit committee the same applies for all committees are paid additionally for each meeting attended audit committee hazardsthe audit committee must take its responsibilities very seriously financial reporting compliance and risk management are subject to a number of hazards especially when the company is a large organization with thousands of personnel and reporting systems stretching across the globe exogenous threats such as cyber hacking are under the purview of an audit committee making its job even more challenging cybersecurity should be an increasing focus for audit committees in corporate boardrooms everywhere 