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A board committee overseeing matters such as financial reporting, audit and internal controls.
Save conceptAn audit committee is a board committee responsible for focused oversight of financial reporting, audit and related controls under its terms of reference. It helps the board scrutinise how information is produced and checked. It does not prepare every accounting entry, run the business or replace the external auditor. Its composition and precise duties depend on the relevant rules and company arrangements.
The committee reviews significant accounting judgments, discusses audit findings and follows up on control weaknesses. It can consider the external auditor's independence and effectiveness and oversee internal audit where that function exists. Management remains responsible for the accounts and controls. The external auditor conducts an audit under its own professional responsibilities; the committee's oversight is a separate layer.
Suppose management reports a large on property. The audit committee asks about the valuer's assumptions, supporting market evidence and the sensitivity of the estimate. It discusses the auditor's findings and whether the notes explain uncertainty adequately. That hypothetical process can improve scrutiny, but committee review alone does not prove the valuation is accurate or that the financial statements contain no errors.
An audit committee differs from an external audit firm and from an internal audit department. Neither the presence of a committee nor an unmodified audit opinion promises that all fraud or future business failures will be detected. Read its mandate, independence and disclosed work. Weak reporting can persist if members receive poor information or fail to act on warnings.
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