the Role of the Audit Committee"
by Lawrence Richard Quinn
addresses how “the best” audit committee chairs are responding to
recent lapses in corporate governance by companies such as Enron, and how
they are strengthening their roles. The
article summarizes interviews with five “most thoughtful heads of audit
committees”, including Roderick M. Hills, former chairman of the SEC and
Diane C. Harris, president of Hypotenuse Enterprises, Inc., a mergers and
acquisitions advisory, consulting and outsourcing firm.
In the article, Diane
Harris put forth four ideas for improving audit committee function in
Assess skills, talents and capabilities of committee members. Harris
was quoted: “Given the
ever-broadening scope of the auditing committee, you need to make sure
that you have the necessary skills available to you – as does the whole
board – whether you’re talking about derivatives, information
technology, or accounting changes."
Audit committees benefit from executives with broad backgrounds
such as those in M&A or former CEOs.
M&A professionals have to have expertise in many subjects in
order to be effective. Of
former CEO’s, Harris
says “I wouldn’t be surprised to see them moving onto boards rather
than off them” given the great need for their skills and
Better preparation for meetings, and much more in-depth knowledge.
is quoted: “Until now,
these committees have received advance materials from a company, then
received a recap of that information, followed by some supplementary
questions asked by committee members.
What I’m suggesting is that change will not necessarily be in the
form of having more audit committee meetings or longer ones but meetings
that are more in-depth and with more preparation required in advance.” Regarding the preparatory information received, Harris
says “You need to read that, digest it, then decide what is most
Access is needed to management and to those in financial staff
is quoted as saying “You need a healthy climate between the audit
committee and management – a consistent, open communication policy so
that you’re in touch with people all the time, not just when there’s a
In summary, and
reflecting the input of the other interviewees as well, Harris says “There will be a lot of change in the
way audit committees work. It
will happen slowly, but the trends are there.”