Audit committee oversight process guidelines

The SEC and the stock exchanges followed with additional new regulations and rules to strengthen audit committees. In 2002, Sarbanes-Oxley increased audit committeesвЂ™ responsibilities and authority, and raised membership requirements and committee composition to include more independent directors. The stock exchanges quickly followed suit by either requiring or recommending that companies establish audit committees. The Securities and Exchange Commission (SEC) first recommended that publicly held companies establish audit committees in 1972. Traditionally, the role of the audit committee has been to oversee, monitor, and advise company management and outside auditors in conducting audits and preparing financial statements, subject to the ultimate authority of the board of directors. Three sections of Sarbanes-Oxley are especially relevant: section 302, which outlines corporate responsibility for financial reports section 404, which covers management assessment of internal controls and section 409, which requires more rapid public disclosure of so-called material events in company performance. For example, the provisions of the Sarbanes-Oxley Act call for senior finance executives and the audit committee of the board to take a much more active role in the operations of the business, as they are charged with certifying the strength of both a companyвЂ™s internal controls and the information they generate. Complying with the new regulations has not only dramatically increased the workload and responsibilities of CFOs, finance teams, and directors, but it also has fundamentally changed their role and their relationship with other, nonfinancial groups within the corporation.

Audit committee oversight process guidelines