How Should an Effective Audit Committee be Governed?

An audit committee should adopt a formal written charter that is focused on the mission of the audit committee. The charter should document the scope of the audit committee’s specific responsibilities, how those responsibilities are carried out and the audit committee’s membership requirements. Rather than a “check the box” type of document, the primary purpose of the charter is to create a practical roadmap to help the audit committee achieve its goals. Thus, drafting a seemingly endless list of responsibilities may actually be counterproductive.

The sample Audit Committee Charter provided in the Appendix is for illustrative purposes only. As such, it may be a useful starting point for an audit committee to use in developing its own charter. In addition, we also recommend consideration of the AICPA’s Audit Committee Charter Matrix, which is available within the Audit Committee Toolkit accessible from the AICPA’s Audit Committee Effectiveness Center. The audit committee charter represents a “living” document that audit committees may use in managing their meeting agendas.¹

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(1) The AICPA’s Audit Committee Effectiveness website has numerous resources available for purchase, including its Audit Committee Toolkit for nonprofit organizations.