Audit committees are mandatory for all public companies. The AICPA and IIA have endorsed the formation of audit committees (or their equivalent) for most organizations, including governmental entities and larger privately-held companies.

Required

a. Define the term audit committee. Indicate its composition.

b. What are the responsibilities of the external auditor to communicate information to the audit committee? Identify all required information that must be communicated to the audit committee and briefly indicate the likely rationale for requiring the communication.

c. Explain why non-public entities might want to have audit committees.

Consider the following entities in formulating your answer:

• Governmental unit, e.g. a school that must be audited

• A charity, e.g., United Way

• A larger, privately-held company