The ASX expects member firms to have audit committees and requires them for Top 500 companies.

a. Describe an audit committee.

b. What are the typical functions performed by an audit committee?

c. Explain how an audit committee can help an auditor be more independent.

d. Some critics of audit committees believe they bias companies in favour of larger and perhaps more expensive public accounting firms. These critics contend that a primary concern of audit committee members is to reduce their exposure to legal liability. The committees will therefore recommend larger, more prestigious firms, even if the cost is somewhat higher, to minimise the potential criticism of selecting an unqualified firm. Evaluate these comments.