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The Importance of the Audit Committee

The audit committee helps to assure independence. The audit committee is comprised of directors, not managers, and their job is to appoint, retain, oversee, evaluate and terminate the audit firm. I think this is important because the process is not administered by executive level management, but the Board of Directors. I think the audit committee is an important initiative.

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According to George, the importance of governance in organizations was the public's focus after the corporate scandals that paved the way to legislations like the Sarbanes-Oxley Act in 2002. Audit committees which are effective can increase the efficiency and integrity of the entire audit process, together with the system of internal controls and the financial reporting methods. An audit committee is an essential element of accountability and governance. (George, 2005)

Audit committees are important in establishing sound governance in public and nonpublic companies. Organizations which have multiple owners (e.g., stockholders) and/or the public government and non-profit organizations must establish an audit committee or an equivalent group with the same functions. The management and the governing board of the company ...

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The solution explains the importance of the Audit Committee in assuring independence. References are included.