Four new roles for your audit committee.
* 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).
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|Title Annotation:||governance; public sector|
|Author:||Heffes, Ellen M.|
|Date:||Sep 1, 2006|
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