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Role of Audit Committees in Corporate Governance

Role of Audit Committees in Corporate Governance

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Published by Arslan Nawaz
Success for any organizations regardless of their type or size is built on a firm foundation of fiscal accountability and governance. Audit committee can allow organization to have stronger internal controls, budgetary and legal compliance, accurate and timely financial reporting and disclosure, sound business practices, and a culture of uncompromised moral and ethical behavior.
Audit Committee has thus become one of the main pillars of the corporate governance system in public companies. In steering companies through today’s complex business environment, boards are going to need strong leadership from their audit committees. This research is carried out with aim to know role of audit committee in UK, USA, Germany and Pakistan corporate governance system. This research paper includes criteria of composition of audit committee, its role and responsibilities.
Success for any organizations regardless of their type or size is built on a firm foundation of fiscal accountability and governance. Audit committee can allow organization to have stronger internal controls, budgetary and legal compliance, accurate and timely financial reporting and disclosure, sound business practices, and a culture of uncompromised moral and ethical behavior.
Audit Committee has thus become one of the main pillars of the corporate governance system in public companies. In steering companies through today’s complex business environment, boards are going to need strong leadership from their audit committees. This research is carried out with aim to know role of audit committee in UK, USA, Germany and Pakistan corporate governance system. This research paper includes criteria of composition of audit committee, its role and responsibilities.

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Published by: Arslan Nawaz on Feb 04, 2014
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08/02/2014

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Page 0 of 36
 
Role of Audit Committees in Corporate Governance
 
2013
 
Submitted To Sir Muzaffar Asad, Lecturer University of Central Punjab Submitted By Hafiz Mohammad Umer L1F11MCOM0149 Mohammad Umer L1F11BCMH2022 Arslan Nawaz L1F11MCOM2165 Mohsin Khan L1F11MCOM0156 Okasha Safdar L1F11BCMH2023 Qaiser Ayub L1F11MCOM2158
 
 
Page 2 of 36
Introduction
In recent years, continuous change in the way that companies do business has become standard practice and this change will continue at an accelerated pace. As the face of business changes so do information needs. This leads to questions over the reliability and relevance of traditional financial reporting and whether it has kept pace with the changes in stakeholder needs. In response to this changing environment, Boards of Directors are now placing increasing reliance on audit committees to oversee reporting and internal control. In a corporate governance approach to financial reporting, audit committees are involved in the oversight of the entire financial reporting process. Throughout the year they learn and inquire about significant matters affecting financial reporting, such as the development of generally accepted accounting practice, accounting estimates, information systems, internal controls and risks and uncertainties. To gain a full understanding of these issues the audit committee will need to consult with financial and operating management as well as the internal and external auditors. The corporate governance approach to financial reporting requires a culture in which management accepts the function of the board of directors and its audit committee to oversee management. Audit committee is an operating committee of the Board of Directors which is charged with oversight of financial information reporting & its disclosure and internal controls. Committee members are drawn from members of the company's board of directors as well as in some cases independent outside directors with at least one qualifying as a financial expert, with a Chairperson selected from among the committee members.
An audit committee‟s responsibility will vary depending upon the entity‟s complexity, size, and
requirements. Numbe
rs of Audit committee‟s members are
 also defined by law in some countries like in US maximum number of audit committee will be six and in Pakistan minimum numbers of audit committee members are three.

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