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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...
Stephen TaubSeptember 20, 2007

Accountants are apparently making inroads on corporate board audit committees. Over the past five years, the portion of accountants sitting on audit committees has doubled from six percent to 12 percent, according to a Huron Consulting Group report.

What’s more, 23 percent of all committee chairs listed were accountants, up from less than 10 percent in 2002, according to the study of more than 670 audit committee members at 164 public companies from the NASDAQ 100 and Fortune 100 listings. In 2002, of course, the Sarbanes-Oxley Act, requiring corporations to disclose whether their audit committees included at least one financial expert, became law. Under Sarbox, corporations have had to consider audit committee members’ accounting backgrounds in gauging whether they could be defined as financial experts.

Whether because of Sarbox or not, board accounting expertise has burgeoned during the life of the act. Indeed, the percentage of audit committees with at least one accountant nearly doubled, up from 21 percent in 2002 to 40 percent in 2006. At the same time, the study found that the composition of talent has changed: audit committee members who are finance professionals exceeded accountants by fewer than 3 to 1 in 2006, down from 5 to 1 in 2002.

The consulting group said the term “accountant” included certified public accountants, controllers and comptrollers, accounting professors, and those who served on accounting standards boards or other similar oversight groups.

Huron found that the portion of audit committee chairs whose biographies revealed accounting backgrounds rose from less than 10 percent in 2002 to 23 percent in 2006, while the number of audit committee chairs thought to be “finance professionals” stayed flat at about 40 percent from 2002 to 2006.

The report analyzed patterns of audit committee makeup over a five-year period from 2002 to 2006 using information contained in the companies’ annual proxy statements and 10-K disclosures.