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Term · Governance & Shareholder Structure

Audit Committee

AdvancedAlso: Audit committee
In briefThe audit committee is a supervisory board committee that oversees financial reporting, the internal control system, and the audit, and safeguards the auditor's independence. At small listed companies, its expert composition is a central building block of effective governance and financial control.

Definition

The audit committee is a committee of the supervisory board that focuses on financial reporting, the internal control and risk management system, and the audit. It oversees the independence of the auditor and prepares the supervisory board's decisions on the annual financial statements. For capital-market-oriented companies, such a committee or a member with corresponding expertise is required.

Why it matters for small caps

At small listed companies with lean bodies, a functioning audit committee is an important control mechanism against accounting risks. If expertise or independence is lacking, the risk of undetected errors in financial reporting increases.

Common misreadings

  • The mere existence of an audit committee does not guarantee quality; what matters is the professional suitability and actual independence of its members.

In the process

→ Used in Step 2 – Stop-or-go check

Frequently asked

What are the tasks of the audit committee?
It oversees the financial reporting process, the internal control and risk management system, the audit, and the independence of the auditor.
Is an audit committee legally required?
For capital-market-oriented corporations, corresponding requirements exist; if no separate committee is formed, the supervisory board as a whole must perform the tasks.
What should investors look for?
The independent composition and the financial or audit expertise of the members, since these largely determine the effectiveness of the control.

Related terms

Corporate GovernanceAudit OpinionConsolidated Financial StatementsFinancial Reporting

Sources

Primary
Category: Governance & Shareholder Structure · Supervisory Board CommitteesRelevance: AdvancedJurisdiction: Germany

Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.