Since the Sarbanes-Oxley Act (SOX) was enacted in 2002, the number of audit committees and their role in governance has greatly expanded. While the act focuses on publicly traded companies, the nonprofit sector has responded by reevaluating its governance structure and processes as well.
Traditionally, the role of the audit committee has been to monitor, oversee, and advise the organization’s managers and external auditor as they prepare financial statements and conduct audits, subject to the ultimate authority of the board. However, with the public focus on transparency and accountability, as evidenced by the expanded disclosures on the new Form 990 and the bad press that accompanies a scandal, the challenge for audit committees is to be more proactive in fulfilling their traditional role, complying with current and new legislation, and upholding their organization’s good standing under public pressure. This expanded role can be defined by some “must-do’s.”