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Audit Committees Embracing Accountants In the five years since Sarbanes-Oxley was enacted, the percentage of accountants sitting on board audit committees has doubled, according to a new report.

Stephen Taub, CFO.com | US
September 20, 2007

Another means of obtaining accounting expertise for Boards

The increased presence of accountants on corporate boards, particularly on audit committees of boards, is to be applauded, and is almost certainly a result of the need for financially literate, and financial reporting expert, board members.

Another Sarbanes-Oxley provision, Section 301, has apparently had less impact, to date, but has the potential to similarly improve corporate governance and control over the financial reporting process. According to this provision, audit committees have been empowered to engage expert advisers, and to require that the reporting entity compensate such advisers.

The role for such advisers differs from and potentially complements that of accountants and other financial reporting-savvy board members. If financial reporting experts are used for the advisory role, they could provide focused assistance regarding such matters as selection of accounting principles by management, creating (as needed) for board members astute technical challenges to actions taken by either management or outside auditors, or both.

Furthermore, such outside advisers, not having regular board duties, could be selectively deployed to conduct such analyses as comparisons of the registrant's financial statement disclosures to those of "peer" companies. These experts might well have access to academic or other data bases that would facilitate performing such studies that audit committee members, even those financially literate or expert, might lack.

Academics and public accounting firm technical experts should be in plentiful supply as candidates for the Section 301-sanctioned advisory roles.

Posted by Barry Epstein | Sep 24, 2007 9:36 AM ET