Audit Committee Responsibilities Describe the responsibilities of audit committees, and list at least four responsibilities that the NYSE has mandated for audit committees

Answer 1

Section 301 of the Sarbanes-Oxley Act outlines the responsibilities of audit committee members for publicly traded companies, stating that audit committees are to be directly responsible for the appointment, compensation, and oversight of the work of registered accounting firms; they must be independent; they must establish "whistleblowing" mechanisms within the company; they must have the authority to engage their own independent counsel; and companies must provide adequate funding for audit committees.
In addition to these broad responsibilities, the NYSE has mandated certain specific responsibilities of audit committees, including:
? Obtaining each year a report by the external auditor that addresses the company's internal control procedures, any quality control or regulatory problems, and any relationships that might threaten the independence of the external auditor
? Discussing the company's financial statements with management and the external auditor
? Discussing in its meetings the company's earnings press releases, as well as financial information and earnings guidance provided to analysts
? Discussing in its meetings policies with respect to risk assessment and risk management
? Meeting separately with management, internal auditors, and the external auditor on a periodic basis
? Reviewing with the external auditor any audit problems or difficulties that they have had with management
? Setting clear hiring policies for employees or former employees of the external auditors
? Reporting regularly to the board of directors
In addition to these responsibilities, in many companies the audit committee also has the authority to hire and fire the head of the internal audit function, set the budget for the internal audit activity, review the internal audit plan, and discuss all significant internal audit results. Other responsibilities might include performing or supervising special investigations, reviewing policies on sensitive payments, and coordinating periodic reviews of compliance with company policies such as corporate governance policies.