An audit committee is an integral part of an organization's governance framework, typically established to provide oversight for financial reporting and disclosures. It is usually composed of members from the organization's board of directors who are not involved in the daily management, thereby ensuring their independence. The primary responsibilities of an audit committee include monitoring the internal and external auditing processes, evaluating financial reports, and ensuring compliance with applicable laws and standards.

One key role of the audit committee is to oversee the effectiveness of internal control systems within the company. For instance, they may review reports from the finance team related to month-end processes or balance sheet reconciliations and ensure that all findings are enforced appropriately. Additionally, audit committees often liaise directly with external auditors during year-end processes to ensure the accuracy and fairness of the financial statements.

An example of where the audit committee's role becomes crucial is during the annual reporting process. Here, they review the financial statements and related reports to identify any discrepancies or irregularities that need to be addressed before publication. By maintaining transparency and accountability, audit committees play a vital role in building stakeholder trust and safeguarding the organization's integrity.