The Sarbanes Oxley act was passed on July 30, 2002. The act demands each member of a company’s audit committee to necessarily be a member of the company’s board of directors, and to be independent. The member should not be a part of the management and should not receive any salary for the services rendered on the audit committee, though he can be compensated as a board member. Companies must disclose the presence of a "financial expert" serving on the audit committee. If the expert is not present, the company must divulge the reason behind that decision.
All non-profit-making systems that carry on audits outside the system should have an audit committee, but this must be a separate entity from the finance committee program. The audit committee is held responsible for hiring, setting the salary, and managing the auditor’s activities. The audit committee has to ascertain that the auditing firm has the requisite skills and experience to carry out the auditing function for the organization, and that its performance is carefully reviewed.
Internal auditing is an independent and objective assurance and consulting process, designed to add value and improve the operation of a company. It helps an organization to achieve its objectives by incorporating a more orderly and disciplined approach to assess and improve the effectiveness of risk management, control, and governance processes