Audit Committee

DEFINITION of 'Audit Committee'

An operating committee of a company's board of directors that is in charge of overseeing financial reporting and disclosure. All U.S. publicly-traded companies must maintain a qualified audit committee in order to be listed on a stock exchange. Committee members must be made up of independent outside directors, including a minimum of one person who qualifies as a financial expert.

BREAKING DOWN 'Audit Committee'

Audit committees maintain communication with the company's chief financial officer (CFO) and controller. Audit committees typically have the authority to initiate special investigations in cases where they determine accounting practices are problematic or suspect, or where problems exist with personnel. 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.

RELATED TERMS
  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Horizontal Audit

    An evaluation of one process or activity across several groups ...
  3. Financial Statements

    Records that outline the financial activities of a business, ...
  4. Accounting

    The systematic and comprehensive recording of financial transactions ...
  5. Certified Public Accountant - CPA

    A designation given by the American Institute of Certified Public ...
  6. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
Related Articles
  1. Professionals

    Financial Auditor: Career Path & Qualifications

    Learn more about what it takes to become an internal or external financial auditor, and determine whether the profession is right for you.
  2. Professionals

    Internal Auditor: Career Path & Qualifications

    Find out what kind of work internal auditors do in large organizations, and learn more about how to get started working in the field.
  3. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  4. Investing Basics

    Free Cash Flow Yield: A Fundamental Indicator

    Free cash flow can measure a business’s performance as if you’re looking at its net income line.
  5. Stock Analysis

    Analyzing Microsoft's Return on Equity (ROE) (MSFT)

    Discover a detailed analysis of Microsoft's historical return on equity, and learn how its ROE stacks up to its competitors in the tech industry.
  6. Stock Analysis

    ValueAct Capital: An Activist Investor Analysis

    Read an in-depth review of activist hedge fund ValueAct Capital, which saw nearly all of its 2015 gains eliminated in a matter of weeks during Q3 2015.
  7. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  8. Investing

    Don't Freak Out Over Black Swans; Be Prepared

    Could 2016 be a big year for black swans? Who knows? Here's what black swans are, how they can devastate the unprepared, and how the prepared can emerge unscathed.
  9. Stock Analysis

    Analyzing Sirius XM's Return on Equity (ROE) (SIRI)

    Learn more about the Sirius XM's overall 2015 performance, return on equity performance and future predictions for the company's ROE in 2016 and beyond.
  10. Stock Analysis

    Will Virtusa Corporation's Stock Keep Chugging in 2016? (VRTU)

    Read a thorough review and analysis of Virtusa Corporation's stock looking to project how well the stock is likely to perform for investors in 2016.
RELATED FAQS
  1. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  2. When does a growth stock turn into a value opportunity?

    A growth stock turns into a value opportunity when it trades at a reasonable multiple of the company's earnings per share ... Read Full Answer >>
  3. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  4. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  5. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  6. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center