Why audit committee matters to a first-time founder
An audit committee gives focused board oversight to financial reporting, the checks and safeguards around it, and independent review. It can challenge management and speak directly with auditors. Founders approaching investment from professional funds or a stock-market listing should understand that the committee supports governance but does not take over management’s responsibility for the accounts.
Examples of audit committee
A listed South African company forms an audit committee of directors who meet local eligibility rules. The committee reviews important choices and estimates in the accounts, meets the external auditor without management present and recommends the auditor’s appointment under applicable rules. Its written responsibilities also cover the company’s own internal audit work and reports of suspected wrongdoing.
Common misunderstanding
The committee does not perform the audit, prepare the financial statements or guarantee that the company’s checks and safeguards work. Membership, independence, expertise and responsibilities vary by law, stock-exchange rules and company policy. A small private company may not be required to have one even if similar oversight remains useful.
When to use it
Establish or review an audit committee when required by law or listing rules, requested by investors, or justified by company complexity. Define membership, authority, reporting and meeting cadence in a charter. Obtain governance advice on independence and mandatory duties in the relevant jurisdiction.