In the same manner, the audit committee also helps in shaping, and positively contributing to Corporate Governance by pointing out reasons and rationale by overseeing the external audit that takes place. Related article What Does a Clean Opinion Mean? (Explained) In this aspect, it is also highly important to consider the fact that Audit Committee helps to establish certain ground rules that ensure that Internal Audit is functioning in a proper manner, so that desired results can be achieved over the course of time.
AUDIT COMMITTEE OVERSIGHT PROCESS FREE
Internal Audit is an extremely important process because of the reason that it helps companies to ensure that the current system is free from any leakages that increase the overall risk exposure of the company. In the same manner, under Corporate Governance, audit committees are also likely to take charge of internal control within the company. Hence, it is something that should be covered by the Audit Committee. This tends to be a very crucial element of the Corporate Governance, and hence, the board is responsible to ensure that financial statements are prepared in a correct manner, in due time, without any misstatements. This tantamount responsibility cannot be extended to just managers, and needs to be attended to in a serious manner. In this aspect, it gets highly important on part of the company to ensure that financial statements have been prepared in a proper manner. Hence, it is understandably sought after by numerous stakeholders. It is representative of the profitability of the company, and the existing financial position.
It is a reflection of how the company has performed over the past year.
Preparation of financial statements tends to be a very important event over the course of the financial year of the company. This ensures that the board is well aware of accounting and finance standards that are integral to take effective decisions. Related article Auditing Inventories: Procedures, Risks, Assertion, and More Regardless of the fact that it might not be necessary for all members to have proper corporate governance, yet it is fundamental to have people on board who have a previous record of managing accounting and finance related decisions at a higher level. This is to ensure that the audit committee is not totally devoid of any technical financial knowledge that can impair their judgement and decision making when it comes to important decisions. In this aspect, they are supposed to have at least one an individual as a financial expert. The manner in which audit committees are structured are representative of the need of having proper credible people on board who can actually make a positive contribution towards functioning of the company.
Role of Importance of Audit Committee in Corporate Governance In this regard, it is also important to consider the fact audit committee is supposed to have an oversight of Internal Audit, as well as External Audit functions of the company.Įffective steering of the audit committee is extremely crucial because of the reason that it is considered as a vital process that helps to protect investors, and keeps the trust between companies and investors intact. The audit committee tends to ensure that companies are able to execute the financial reporting process in an effective manner, in addition to the audit process within the organization. The role of the audit committee in corporate governance is quite tantamount when it comes to establishing a concrete scheme of affairs to oversee the effective conducting of the audit process.
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