A new component of the audit process under Sarbanes-Oxley is the role of the audit committee. Previously, it was the norm for audit firms and management to have very close relationships, and frequently auditors moved into accounting positions in the company. It was management's job to select the audit firm, and more often than not the board of directors was comprised of management or close associates of management. Because of the scandals and the fallout, new rules of governance and independence were created. The PCAOB and the SEC feel that board composition and responsibilities, particularly the audit committee, will dramatically change the confidence level of the investing public and create a new standard of governance.

Audit firms are now selected by the audit committee, comprised of independent members of the board of directors. Additionally, the audit committee is responsible for the audit, evaluating the auditor, and audit funding. Audit committees can also select other third-party experts for assistance as they deem necessary. In its independent role, the audit committee is also responsible for reviewing any complaints received by the company, internally or externally, about concerns regarding internal controls or auditing issues. This is the so-called "whistle-blower" provision to prohibit retaliation against personnel in instances of alleged fraud or other wrongdoing.

Internal audit functions are also accountable to the audit committee as they become the eyes and ears of the committee about what is going on within the company. The audit committee will likely encourage an atmosphere...