Audit Committee Duties and Best Practices

Audit Committee Duties and"Best Practices"March 21, 2002Audit Committee Duties and "Best Practices"Public and regulatory attention is focused on the adequacy of public company corporategovernance procedures. As a result, this is a good time to evaluate the duties of your auditcommittee and how well the committee is satisfying its responsibilities. This memorandumoutlines applicable legal requirements and presents some audit committee "best practices"for your consideration.We cover the following topics in this memo: Basic Standards of Conduct- Fiduciary Duties and Certain Duties Under Federal Securities Laws- Exposure to Liability Audit Committee Members- Independence- FinancialLiteracy- Other ImportantQualities- AdditionalConsiderations Principal Functions of the Audit Committee- Best Practices - Monitoring the Accounting and Financial Reporting Processesand Systems of Internal Control- BestPractices- Monitoring ExternalAuditors Audit Committee Charter and Proxy Statement DisclosuresBasic Standards of ConductFiduciary Duties and Certain Duties Under Federal Securities LawsState corporate laws set forth standards of conduct that apply to members of acorporation's Board of Directors. The two primary duties of directors are the duty of loyaltyand the duty of care. The duty of loyalty requires that directors act in good faith and not infurtherance of their own personal interests at the expense of the company. The duty of carerequires that ...