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GAO survey finds need to strengthen bank audit committees.

A General Accounting Office report, Audit Committees: Legislation Needed to Strengthen Bank Oversight, discusses a GAO survey of 40 audit committee chairpersons of banks with assets of $10 billion or more.

Of the 40 banks, 25 included major bank customers on their audit committees. The audit committees of three banks consisted entirely of large bank customers. The GAO believes larges borrowings or large deposits by an audit committee member may limit the member's ability to oversee the institution independently. It urges that large bank customers be prevented from serving on audit committees to prevent conflicts of interest.

All but 5 of the audit committee chairpersons have expertise in at least one area of financial management, but many chairpersons reported their committees lacked expertise in accounting and auditing. Of the responding banks, 19 said their committee members had no expertise in banking, 14 said their members had no expertise in accounting and auditing and 13 had no legal experience and had never met independently with bank legal counsel.

Of the 40 respondents, 38 said the quality of the evaluations made by the external auditors was a very great or great factor in deciding how effective audit committees were in overseeing the bank. Also, 38 chairpersons said they expected the external auditors to uncover all internal control weaknesses, and 22 said they expected the outside audit to identify noncompliance with banking laws and regulations.
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Publication:Journal of Accountancy
Date:Dec 1, 1991
Words:232
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