1. Explain the function of the audit committee, and describe why it is important that it consist of outside (nonmanagement) directors.
2. One of the factors contributing to the 2008-2009 recession was the unwillingness of commercial banks to extend loans to customers, some of whom were quite creditworthy. This unwillingness led to what was called a "credit crunch." Discuss reasons why banks would become reluctant to extend credit to customers, and how the financial reporting system represents these loans on the banks' financial statements.