Definition of Audit Committee

Audit Committee

A subcommittee of a company's board of directors assigned the responsibility
of ensuring that corporate financial reporting is fair and honest and that an audit is conducted
in a probing and diligent manner.

Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees

A committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial
reporting environment in the United States. In a report dated February 1999, the committee
made recommendations for new rules for regulation of financial reporting in the United States that
either duplicated or carried forward the recommendations of the Treadway Commission.

Treadway Commission

Also known as the National Commission on Fraudulent Financial
Reporting. A special committee formed in 1985 to investigate the underlying causes of fraudulent
financial reporting. The commission was named after its chairman, former SEC commissioner
James Treadway. The commission's report, published in 1987, stressed the need for strong
and independent audit committees for public companies.

Management

Management refers to the individuals in an entity that have the authority and the responsibility to manage the entity. The positions of these individuals, and their titles, vary from one entity to another and, to some extent, from one country to another depending on the local laws and customs. Thus, when the context requires it, the term includes the board of directors or committees of the board which are designated to oversee certain matters (e.g., audit committee).

Auditor's report

A section of an annual report containing the auditor's opinion about the veracity of the
financial statements.

Committee, AIMR Performance Presentation Standards Implementation Committee

The Association for Investment Management and Research (AIMR)'s Performance Presentation Standards Implementation
committee is charged with the responsibility to interpret, revise and update the AIMR Performance
Presentation Standards (AIMR-PPS(TM)) for portfolio performance presentations.

Post-audit

A set of procedures for evaluating a capital budgeting decision after the fact.

compensation committee

a company committee comprised mainly of members of the board of directors; is responsible
for establishing compensation packages for top management
and setting general compensation policies and guidelines

postinvestment audit

the process of gathering information
on the actual results of a capital project and comparing
them to the expected results

quality audit

a review of product design activities (although
not for individual products), manufacturing processes and controls, quality documentation and records, and management philosophy

Federal Open Market Committee (FOMC)

Fed committee that makes decisions about open-market operations.

Accounting and Auditing Enforcement Release (AAER)

Administrative proceedings or litigation releases that entail an accounting or auditing-related violation of the securities laws.

Panel on Audit Effectiveness

A special committee of the Public Oversight Board that was created
to perform a comprehensive review and evaluation of the way independent audits of financial
statements of publicly traded companies are performed. The panel found generally that the
quality of audits is fundamentally sound. The panel did recommend the expansion of audit steps
designed to detect fraud.

Configuration audit

A review of all engineering documentation used as the basis
for a manufactured product to see if the documentation accurately represents
the finished product.

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