What is one characteristic an effective audit committee member should have to minimize fraudulent activities?

An effective audit committee member ideally should be a director from outside the company because such individuals bring an objective perspective that is crucial for overseeing the organization's financial reporting and auditing processes. Outsiders are less likely to have conflicts of interest that could impair their independence. Their external viewpoint can help identify potential areas of concern that internal members might overlook due to familiarity or bias.

Having directors from outside the company helps ensure that the audit committee operates with greater transparency and accountability. These external members are often more capable of questioning management decisions, scrutinizing practices and policies, and challenging potentially unethical behaviors without fear of repercussions. This independence is vital for fostering a culture of integrity and reducing the risk of fraudulent activities within the organization.