What is the role of the audit committee?

The role of the audit committee is primarily to oversee the effectiveness of internal controls, which is crucial for ensuring the reliability of financial reporting. The audit committee is typically composed of independent board members who have a deep understanding of the financial and accounting processes of the organization. They are tasked with monitoring the internal audit function, assessing the adequacy of internal controls, and ensuring compliance with legal and regulatory requirements.

By overseeing the effectiveness of internal controls, the audit committee helps to mitigate risks related to financial misstatements and fraud. This oversight encompasses reviewing the internal audit's findings, discussing significant financial reporting decisions, and ensuring that appropriate measures are in place to address any identified deficiencies.

The other responsibilities, such as performing audits directly, preparing financial statements, or handling external communication, are not typically within the scope of the audit committee. Instead, the committee relies on internal and external auditors for conducting audits and providing expert assessments, while management is responsible for preparing financial statements and communicating externally.