Audit committees are a key institution in the context of corporate governance because they help boards of directors fulfill their financial and fiduciary responsibilities to shareholders. Through their audit committees, boards of directors establish a direct line of communication between themselves and the internal and external auditors as well as the chief financial officer. Such an organizational structure and reporting responsibility in an environment of free and unrestricted access enables full boards of directors not only to gain assurance about the quality of financial reporting and audit processes, but also to approve of significant accounting policy decisions. Moreover, strong and effective audit committees, through their planning, review, and monitoring activities, can recognize problem areas and take corrective action before such problems impact the company's financial statements and investors. Thus, audit committees have an important role in helping boards of directors avoid litigation risk because such committees...