If passed, the new rule will no doubt be received unenthusiastically. Just as they did with the "to-do" lists that were part and parcel of Sarbanes-Oxley, board members and corporate executives alike fear the changes will create more work for them, possibly raise audit fees, and blur the lines between management, auditors, and audit committees. The PCAOB is now reviewing nearly three dozen comment letters on the matter. In one, Arnold Hanish, Eli Lilly's chief accounting officer, stated that some of the new requirements "are overly prescriptive and could result in increased audit costs with little or no benefit."
Whether you are a CFO who sits on an audit committee or simply deals with one, the workload seems certain to increase. Ironically, CFOs interested in landing board spots may find that the changing landscape actually works against them. "Boards need financial experts," says William Hernandez, retired CFO of PPG Industries who now sits on the audit committees of USG and Black Box, "but some of the best questions come from people [with general management experience] who never worked a day in finance."
Sarah Johnson is senior editor for regulation at CFO.
By the Numbers: Audit Committees
86% of companies require their audit-committee members to demonstrate financial literacy1
3/4 of audit committees view risk management as a top concern2
26% of audit committees receive reports on the company's liquidity position every month2
20% of audit-committee chairs hold a financial-management position, such as CFO or treasurer (up from 3% in 2002)3
8% of the top 500 companies' CFOs moonlight as audit-committee chairs4
Sources: 1National Association of Corporate Directors, 2KPMG/NACD, 3Spencer Stuart, 4Crist Kolder
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