What is the purpose of an audit committee's oversight in corporate governance?

• A. To ensure accuracy of financial reporting, independence of external auditors, and effectiveness of internal controls.
• B. To set executive compensation.
• C. To approve high-risk investments.
• D. To manage day-to-day accounting.

Answer: (A)

The audit committee’s oversight centers on the reliability of the company’s financial information. It ensures the accuracy of financial reporting, protects the independence of external auditors, and monitors the effectiveness of internal controls. By reviewing financial statements, discussing accounting policies, and supervising the internal control system and internal audit function, the committee helps prevent and detect misstatements and fraud, providing confidence to the board and investors that the numbers reflect reality. This independence and scrutiny are what give financial reporting credibility.

This role sits apart from setting executive pay, which is handled by the compensation committee; from approving high‑risk investments, which falls under risk governance or the board’s broader oversight; and from day‑to‑day accounting, which is the responsibility of management and the accounting staff.