In a recent court decision, a U.S. corporation was required to delegate certain responsibilities to its audit committee. The audit committee was required to do the following:
a. Consult with its independent auditors before deciding any significant or material accounting question or policy.
b. Retain independent auditors to perform quarterly reviews of all financial statements prior to public issuance.
c. Conduct internal audits, with personnel reporting directly to the audit committee (internal auditors must report quarterly to the audit committee).
d. Retain or dismiss independent and internal auditors.
e. Consult with the independent auditors on their quarterly reviews of financial statements.
f. Review all monthly corporate and division financial statements and the auditor’s management letter.
g. Receive quarterly reports from independent auditors on internal control deficiencies.
h. Review and approve all reports to shareholders and the SEC before dissemination. The court also ruled that the audit committee must be composed of at least three outside directors who have no business dealings with the firm other than directors’ fees and expense reimbursements.
1. Prepare a partial corporation organization chart to depict these requirements. Use boxes only for Audit Committee, Independent Auditors, Internal Auditing, Finance Vice President, and Board of Directors. Connect the appropriate boxes with lines: solid lines for direct responsibility and dashed lin
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