Audit Committees Should Lead by Example

BY MARY ELLEN OLIVERIO

The authors of “ Eight Habits of Highly Effective Audit Committees ” (Sept. 07, page 46) have identified relevant recommendations. However, these recommendations are for an audit committee that is a new body in the governance of a company or one in a company where formerly the audit committee merely listened to the CEO and hastily determined that “all is fine,” as seemed to be the style at Enron, for example. These are recommendations at the beginning stage of an audit committee’s life.

Audit committees should function at varying stages of performance—in the same manner as does a manager in relation to new employees, a president in relation to senior executive vice presidents, a nation in relation to its neighbor nations. As reliable evidence of quality performance persists, oversight responsibilities are reduced. I was reminded of this when I read one sentence in the article—a potentially powerful one: “Members of the audit committee are role models.” By its performance, the audit committee may elevate performance throughout the company and, therefore, change the nature of the committee’s oversight strategies.

I would like to see the insightful authors explore the observations, the reports, the insight from conversations with management that are critical for a reliable judgment of executive leadership quality. What evidence gives an audit committee—as well as the board—assurance that executive leadership has reached a level of consistent behavior that trust is warranted?

Effective, wise oversight leads to less need for such oversight, not more. Wise parents, wise supervisors, wise company heads implement this simple observation. While it appears somewhat Utopian, it is attainable for an audit committee, too.

Mary Ellen Oliverio, CPA
New York City

SPONSORED REPORT

Cybersecurity threats proliferating for midsize and smaller businesses

This report details how SMBs can properly protect private information from breaches, design and implement a cybersecurity policy, and create safeguards for training and education.

QUIZ

Test yourself on these often confused words

The spelling checker on your word processing program can do only so much to flag problems. Your best insurance is to learn the troublesome words that trip up writers and use them correctly by the standards of formal, written English.