Chapter 11, Problem 17C

The city council members of Laurel City are considering establishing an audit committee as a subset of the council. Several members work for commercial businesses that have such committees. They have asked your advice as a partner in the public accounting firm that audits the city’s annual financial statements. They are especially interested in whether the benefits of such a committee outweigh any costs to establishing one.

Required

1. a.      What guidance is available to help the city establish an audit committee and have it operate efficiently and effectively?
2. b.      Provide a short report to the council that lists the benefits and costs of establishing an audit committee. Explain what qualifications would be expected of council members who sit on this committee and the tasks in which they would be engaged.