Securities Law, NYSE, NASDAQ & OTC Markets Listings & Compliance

Navigating Audit Committee Requirements

For public companies in the U.S., the audit committee plays a critical role in maintaining investor confidence and ensuring accountability. Audit committees sit at the intersection of corporate governance, financial integrity, and risk oversight. If you serve on a board—or advise one—understanding the rules that govern audit committees is essential. 

Who Sits on the Audit Committee?

Audit committees of publicly traded U.S. companies must adhere to regulations set by the Securities and Exchange Commission (SEC) as well as the listing requirements of the stock exchange where the company’s securities are traded, such as the Nasdaq or the New York Stock Exchange (NYSE).

• Composition. Under NYSE and Nasdaq requirements, the audit committee should consist of three or more directors. 
• Independence matters. All members must comply with the independence requirements of the SEC, NYSE, and Nasdaq. The independence of audit committee members should be continually maintained, monitored, and reviewed at least annually.
• Financial literacy. All members should be financially literate, and at least one should ideally qualify as a “financial expert.” While the SEC doesn’t mandate it, companies must explain why they don’t have such an expert if that’s the case. 
• Managing overcommitment. The NYSE adds another layer: if a director serves on three or more audit committees at once, the board must disclose whether that workload affects their effectiveness. 

The Audit Committee Charter

Every audit committee must operate under a charter—a document that outlines its authority, responsibilities, and scope.

• Regulatory backbone. The charter must comply with SEC, NYSE, and Nasdaq standards. 
• Independent authority. Committees are empowered to hire independent counsel or advisers, often turning to legal experts for guidance on compliance, whistleblower cases, or investigations. 
• Annual updates. Since regulations and corporate priorities evolve, best practice is to review and update the charter at least annually. Many committees use the charter to map out an annual calendar of topics, ensuring that critical issues—like financial reporting, risk management, and internal controls—receive consistent attention. Factors that influence updates include changes in regulatory or legal requirements, changes in the committee’s responsibilities, and changes in the company’s bylaws. 

Evaluating Performance

The NYSE requires audit committees to conduct annual self-evaluations, but even when not mandatory, this practice adds real value.

A strong evaluation process looks at:

• Whether the committee’s composition meets the company’s needs 
• How well the committee understands key risks and business dynamics 
• The effectiveness of its oversight on financial reporting, ethics, compliance, and internal controls 
• The quality and usefulness of information provided by management 

Done thoughtfully, evaluations can spark meaningful change, including updating meeting structures, improving reporting quality, or refreshing committee membership.

Why This Matters

Audit committees are facing an expanding workload. In addition to their traditional focus on financial reporting and internal controls, many are now expected to weigh in on cybersecurity threats, ESG disclosures, and evolving regulatory expectations.

That makes it critical for boards to not only meet the baseline requirements but also adopt proactive practices:

• Recruiting members with diverse expertise 
• Ensuring ongoing education on emerging risks 
• Periodically revisiting committee composition and structure 

An audit committee is more than a compliance tool—it’s a safeguard for investors, a watchdog for corporate integrity, and a partner in long-term value creation.

If you have questions about NYSE and Nasdaq company corporate governance matters, Hamilton & Associates Law Group, P.A. is ready to help. Our Founder, Brenda Hamilton, is a nationally known and recognized securities attorney with over two decades of experience assisting issuers worldwide with going public on the Nasdaq, NYSE, and OTC Markets. Since 1998, Ms. Hamilton has been a leading voice in corporate and securities law, representing both domestic and international clients across diverse industries and jurisdictions. Whether you are taking your company public, raising capital, navigating regulatory challenges, or entering new markets, Brenda Hamilton and her team deliver the experience, strategic insight, and results-driven representation you need to succeed.

To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].

Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com