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Significant emphasis has recently been placed on the importance of audit committees to the sound governance of public companies.
The increased responsibilities of public companies' audit committees are expected to have a significant effect on the audit committees of nonpublic companies as well as public sector entities (governments and nonprofit organizations). As a result, the governing boards of all organizations, public and private, must become more attentive to the appropriate functioning of their audit committee or finance committee acting in the capacity of an audit committee.
Every organization that represents the interest of multiple owners (e.g., corporate stockholders) and/or the public (e.g., governments and nonprofit organizations) should have an audit committee or the equivalent. The preparation of financial statements and related communications are the responsibility of the entity's management and the governing board. The independent auditor's role is to report on the fairness of the presentation of the entity's financial statements, and to communicate any identified internal control related matters and instances of noncompliance to management and those charged with governance. The primary role of the audit committee is to provide assurance to the governing board that the organization has the appropriate culture, personnel, policies, systems, and controls in place to safeguard entity assets and to accurately report financial information to internal and external users.
The specific activities of the committee will vary from entity to entity, depending on the size, complexity, and industry of the organization and needs of the governing board.
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