What is an Audit Committee?

//What is an Audit Committee?
What is an Audit Committee? 2017-09-30T06:28:37+00:00

Definition: An audit committee is the section of an organization’s board of directors that is in charge of monitoring an organization’s financial reporting and authenticating its accuracy.

What Does Audit Committee Mean?

What is the definition of audit committee? In laymen’s terms, it’s comprised of approximately five individuals who are usually from outside of the organization itself. Their primary responsibility is to provide an objective and unbiased view of the organization’s practices. The purpose of the audit committee being comprised of members from outside of the organization is to ensure that the audit process is neutral by removing the conflict of interest.

Businesses use internal committees when they want to verify that their managers and financial analysts are using the correct internal protocol for financial reporting items like; business regulations, accounting policies, and risk management policies. Typically organizations will rely on this committee to help create financial reporting procedures as well. The advantage of these audit committees is that they have helped companies to run substantially smoother since their initial installment.


Jamie runs a company called the Brew Beerdogs. Its nearing the end of the 4th quarter in the fiscal year, so Jamie decides that she wants to audit her company in order to ensure that the financial reporting and numbers that she received are accurate. She presents the idea to her board of directors and they approve. From there, she seeks out a panel of about 5-7 individuals outside of the company and assembles these individuals together to form her official committee.

Once the committee has received approval from the board, they then proceed to commence with their audit her organization. Using her guidelines and federal regulatory policies, the committee that Jamie composes analyzes the efficacy and adherence to these standards by different facets of her organization. Their final report confirms that the financial regulators in her company are acting within their bounds and that the financial reporting is accurate. They also return a list of suggestions to Jamie as well.

Summary Definition

Define Audit Committees: Audit committee means a board of advisors who are charged with the task of overseeing the financial reporting of a company.