Printer Friendly

Four new roles for your audit committee.

Over the past several years, the audit committee of a public company board has gone from being a quiet place to nap after lunch to become a high-pressure, high-skill keystone of governance and legal oversight. What about the person who leads this spotlight group today? What's the profile for the next-generation audit committee chair?

* Targeted auditing expertise. Five years ago, it was okay to be the AC chair just because you rotated into the slot. Today, you're expected to have "financial literacy" (or, at least someone on the committee is required to have it). Tomorrow, "we'll want people with much greater depth in financial accounting or audit," says David Sinason, an accounting professor at Northern Illinois University and author. Look for "more people with specific auditing experience to head the committee," he predicts. Audit is a specialized field, and accounting or finance background just isn't the same.

* Has very strong business communication skills. "The network of relationships the chair must navigate now is more complex," notes Peter Rossiter, an attorney with the firm of Schiff Hardin. AC chairmen must reach outside the boardroom to work and communicate fully, yet sensitively, with the outside audit partner, inside audit staff, counsel and top management. People skills are far more important--especially when the players disagree over a technical audit issue. Today, the committee chair will be the one stuck with the thankless role of being the Solomon who negotiates a decision.

* Be an excellent organizer. With far more to do, and more formal oversight and certification duties, the audit committee's agenda now is full to the brim. The committee also has much tighter deadlines for filings and disclosures. An AC chair who's always five minutes late, or is a distracted organizer, can put the company in very real danger.

* Ability to look beyond the numbers. "Before SOX [the Sarbanes-Oxley Act], the audit committee had a passive review function," says Rossiter. "Now, it plays a much more active role." The AC has been handed a variety of added oversight functions that go far beyond a basic balance sheet. Estimating and reducing potential liabilities, judging internal controls, assuring proper disclosure policies and performance--a committee chair skilled solely in accounting may overlook some of these new demands.

Source: Ralph Ward's Boardroom Insider (www.boardroominsider.com).
COPYRIGHT 2006 Financial Executives International
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2006, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:governance; public sector
Author:Heffes, Ellen M.
Publication:Financial Executive
Geographic Code:1USA
Date:Sep 1, 2006
Words:379
Previous Article:From the editor.
Next Article:Senior execs seek better view of costs.
Topics:


Related Articles
Enhancing audit committee effectiveness.
The state of audit committees.
Unleashing the potential of internal audit: as executives and directors rethink their corporate governance procedures, the authors offer a four-step...
Who's watching you how? Effective oversight by an audit committee can help nonprofits remain effective in addressing social issues.
Internal audit: active ingredient in reform mix. (Audit).
Burying the past: audit firms have gotten tougher--and board audit committees have, too.
Selling to audit committees: to develop opportunities CPAs need to find out exactly what services a committee needs.
Changes in auditing practices affect nonprofit governance.
The sky isn't falling fear of SOX is waning.
Ten best practices for audit committees: the public company audit committee now has an enhanced role and needs to revise some of its practices. Here...

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters