Lawmakers (SOX), regulators (SEC rules), and listing standards of national stock exchanges (NYSE, Nasdaq, AMEX) generally require public committees to have an audit committee, which must be composed of independent directors with no personal, financial, or family ties to management.
Standards Relating to Listed Company Audit Committees outline these requirements, which relate to:
Audit committee members to be independent
Audit committee members to select and oversee the issuer’s independent account
Procedural process for handling complaints regarding the issuers accounting practice
The authority of the audit committee to engage advisors