Question

Provide a brief summary of the role audit committees and corporate governance play in ensuring effective oversight of the financial reporting process. What factors are necessary to ensure "good governance"? What characteristics are essential for the board and audit committees to remain objective in their oversight of the financial reporting process? How does compensation influence the audit committee's ability to be effective in their oversight role?

Answer 1

Role of audit committees and corporate governance:-

The audit committee role forms the key for effective corporate governance. Boards rely on their audit committee for effective oversight of the annual auditing process. Members of the audit committee are independent and objective is to effectively implement the company's decision. It's a vital process for protecting investors and health if the capital markets.

Audit committee also oversee the system of internal controls and ensure that the company is in compliance with laws and regulations. The role of the audit committee includes such responsibilities as appointmenting and overseeing the work of the auditor and managing the auditor's compensation.

Nature and characteristics:-

The independence of audit committee members.

The audit committee's responsibility to select and oversee the issuer's independent accountant.

Procedures for handling complaints regarding the issuer's accounting practices

The authority of the audit committee to engage advisors

Funding for the independent auditor and any outside advisors engaged by the audit committee  

Effective audit committee oversight is essential to investor protection and functioning of capital markets.

Good governave is a way of measuring how public institutions conduct public affairs and manage public resources.

It produce results that meet the needs of society while making the best use of resources.

Good governance key attributes are:-

Transparency,

Responsibility

Accountability

Participation

Responsiveness

Compensation influence the audit committee's ability to be effectively in their oversight role.