Chapter 06 · Governance & regulationGovernance, Ethics & Risk
Audit committee
Definition
A committee established by and from the board of directors to oversee the entity's accounting and financial reporting processes and the audits of its financial statements; where no such committee exists, the full board performs the role. Listed-company rules typically require independent members and at least one financial expert.
References
Formal definition; oversight of accounting, financial reporting and audits; full-board fallback.
Oversight remit — financial reporting, risk, ethics and compliance, internal audit; evolving role including AI and ESG risk oversight.
Overview
What it means
The modern audit committee's remit, strengthened after early-2000s corporate scandals, covers appointment and oversight of independent auditors, review of financial statements and disclosures, oversight of internal control over financial reporting, whistleblower procedures and enterprise risk.
Its scope is expanding to sustainability: ESG risk oversight, assurance of sustainability reporting and connectivity between sustainability and financial disclosures increasingly sit with the committee.
How it is used
Companies formalise the committee's duties in a charter; regulators and exchanges set composition and independence requirements. In sustainability governance, boards assign oversight of climate risk, sustainability assurance and non-financial reporting either to the audit committee or a dedicated sustainability committee.
Why it matters
Credible sustainability disclosure needs the same governance discipline as financial reporting. Where audit committees extend their controls mindset to sustainability data, greenwashing risk falls; where they don't, sustainability claims lack institutional checking.