Audit Committee:

The audit committee is a separately chartered committee of the board of directors. The audit committee has a direct relationship with the board of directors as it reports to the board on a quarterly or more frequent basis on such things as audit plans, audit findings and other items deemed to be significant. The role of the audit committee has significantly expanded in recent years. Realizing this, the board of directors has begun to shift some of the audit committees responsibilities to separately chartered committees to create a balance of duties and ensure they are effectively executed. These additional committees have often included a compensation committee, disclosure committee, and nominating and governance committee.

Principal Functions of the Audit Committee

The audit committee assists the Board in fulfilling its statutory and fiduciary oversight Responsibilities relating to the company's financial accounting, reporting and controls. Its Principal functions are to: Monitor the periodic reviews of the accounting and financial reporting processes And systems of internal control that are conducted by the company's independent Auditors, financial and senior management and internal auditing department (if The company has one); and review and evaluate the independence and performance of the company's Independent auditors. In performing these oversight functions, the Board and audit committee should seek to Oversee the adoption of quality accounting policies and internal controls, and hire effective Independent auditors, in order to deter fraud, anticipate financial risks and promote Accurate, timely and meaningful disclosure of financial and other information to the Board, The public and the SEC.

Audit Committee functions and responsibilities

The functions and responsibilities of a better practice Audit Committee will generally be to provide independent assurance and advice in the following areas: Risk management Internal control Financial statements Compliance external requirements Internal audit External audit Other relevant functions including review of an entities governance arrangement; performance framework; relevant parliamentary committee reports and recommendations; and portfolio responsibilities.

Finance Talent Assessment

Arguably the most important aspect of the audit committees oversight of financial reporting is to assess the abilities of the companys finance talent. Having the right talent results in the appropriate level of competence, skill, and integrity needed to produce sound financial statements. This assessment may provide a basis for determining where investment could be made in enhancing the abilities of the current staff or considering the need for outside hiring and assistance. The success of addressing the issues below largely depends on the company personnel leading the assessment and response, while the audit committee evaluates whether company personnel have the ability to succeed.

There are four steps audit committees can take in overseeing their finance organization strategy: Evaluate the development of managements talent strategy specific to finance Evaluate managements definition of what finance talent means to your organization Evaluate the critical workforce segments of your finance organization and their development needs Evaluate finance-specific programs established to develop your leadership team.

Audit Committee Role and Responsibilities: Audit Committee Role:

For an audit committee to fulfil its new and continuing obligations asking the tough questions understanding the answers and properly disseminating information are crucial.

Audit Committee basic responsibilities:

Include adopting a charter Monitoring the reporting process Overseeing the outside auditor Paying attention to management and employees. Audit committee members should also be familiar with additional reporting requirements imposed upon companies by the Sarbanes-Oxley Act to ensure timely and accurate reporting. The Act further requires that each annual report include a discussion stating managements responsibility for establishing effective internal controls and procedures for financial reporting, as well as provide an assessment of the effectiveness of such controls and procedures. Audit committee members should be aware of certain conflict-of-interest and other provisions imposed on the outside auditor under the Act. Under the Sarbanes-Oxley Act, an accounting firm cannot provide audit services if one of the companys senior management was employed by that accounting firm during the prior year. The Act further provides that the lead and review partners of the outside auditor must rotate so that neither role is performed by the same individual for more than five consecutive years. After disclosures that Andersen received $25 million for its auditing services and $27 million for its non auditing services performed for Enron during 2001, the rendering of non audit related services was criticized, and outside auditors are now expressly prohibited from performing certain non audit services. In addition to any future service that might be deemed impermissible by the Public Company Accounting Oversight Board (PCAOB), there are eight non audit services that an audit committee cannot approve: Bookkeeping Financial information systems design and implementation Appraisal or valuation services fairness opinions Actuarial services Internal audit outsourcing services Management functions or human resources Broker-dealer, investment adviser, or investment banking services Legal services and expert services unrelated to the audit.