Audit Committe

*Corporate governance refers to the policies and practices that guide the interactive relationship between a company's shareholders, management, and board of directors to achieve common goals such as corporate integrity, effectiveness, value, and competitiveness.

*Corporate governance is part of the control environment that is evaluated by the auditor during risk assessment. Corporate governance practices and policies -- the tasks assigned and performed by the corporation's board of directors and audit committee -- affect a corporation's organizational culture and set what is commonly referred to as the "tone from the top."

*Corporate governance covers a spectrum of areas, including an organization's risk-management systems, executive compensation structure, internal audit functions, codes of conduct, and information technology (IT) governance.

*Auditors must develop a good understanding of a client's corporate governance practices and policies because these practices and policies form the foundation of a client's control environment. This understanding is obtained through audit procedures such as interviews with management and/or board members, review of the board of directors meeting minutes, and requesting and reviewing corporate policies -- including the organization's code of conduct, ethics, mandates, and charters. The auditor documents this understanding in the working paper file, using tools such as checklists, narratives, and/or flowcharts.

*the auditor should assess the extent of involvement and effectiveness of the audit committee in these key areas of financial compliance. The primary responsibility of the audit committee is to monitor financial compliance, including providing oversight of (i) the external auditor, (ii) the integrity of the financial statements, (iii) the organization's internal audit function, and (iv) compliance with legal and regulatory requirements.