What is the role of the audit committee in fraud detection?

The audit committee plays a crucial role in fraud detection primarily by providing oversight and establishing an appropriate tone at the top regarding the organization’s stance on fraud. This means that the audit committee is responsible for fostering an environment that discourages fraudulent behavior through strong ethical guidelines and ensuring compliance with legal and regulatory standards. By setting clear expectations and promoting a culture of integrity and transparency, the audit committee helps mitigate the risk of fraud within the organization.

Moreover, the audit committee also monitors internal controls and the overall governance framework, ensuring that proper procedures are in place for identifying and mitigating fraud risks. This proactive involvement reinforces the organization’s commitment to preventing fraud and encourages employees to adhere to ethical practices, thus effective fraud detection.

The other options, while they may touch on aspects of the audit process or oversight, do not accurately reflect the primary responsibilities of the audit committee. They either suggest a more operational role than the committee is designed to have or attribute functions that are typically handled by different parts of the organization, such as management or legal departments.