Audit Committee Effectiveness

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Questions and Answers

What is one of the primary roles of an effective audit committee?

  • To manage employee relations
  • To oversee the marketing strategies of the company
  • To ensure reliable financial reporting (correct)
  • To provide financial advice to stakeholders

An effective audit committee does not require qualified members.

False (B)

Who defined an effective audit committee in 2002?

De Zoort

An effective audit committee must have the authority and ____ to protect stakeholder interests.

<p>resources</p> Signup and view all the answers

Match the elements of audit committee effectiveness with their descriptions:

<p>Qualified members = Members who have the necessary skills and competencies Authority = The power to make decisions and take actions Diligent oversight = Thorough and careful monitoring of financial activities Risk management = The process of identifying and mitigating potential risks</p> Signup and view all the answers

Flashcards

Effective Audit Committee

An audit committee is considered effective when its members are qualified and have the power and resources to protect stakeholders.

Qualified Audit Committee Members

Members of an effective audit committee possess the necessary knowledge and skills to understand financial reporting, internal controls, and risk management.

Authority of an Audit Committee

An effective audit committee has the proper authority to make decisions and take actions to ensure financial reliability.

Resources of an Audit Committee

An effective audit committee has the resources, such as funding and staff, to effectively perform its oversight role.

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Oversight Role of Audit Committee

An effective audit committee actively oversees the financial reporting, internal controls, and risk management practices of an organization.

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Study Notes

Audit Committee Effectiveness

  • An effective audit committee possesses qualified members.
  • These members have the authority and resources.
  • Their role is to protect stakeholder interests.
  • This involves ensuring reliable financial reporting.
  • It also involves ensuring strong internal controls.
  • Risk management is also a key aspect.
  • Diligent oversight is crucial for effectiveness.

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