Recently, I was asked by my town officials to become a member of the fire sprinkler inspection team, whose purpose as explained to me, is to ensure that all emergency sprinkler systems within our area’s municipal buildings are up to code and functional.
I told them I’d be happy to help, except that in full disclosure, I don’t know the town fire code from Morse code.
Not to worry they replied, there was a vacancy on the committee and they were just glad I could fill it.
I left feeling like I’d just been given what is known as a left-handed compliment. I was flattered to have been asked, but left wondering how much beyond a body temperature of 98.6 and eyesight above that of Mr. Magoo was required for consideration.
After seeing a report released last week by the Huron Consulting Group on the composition of audit committees, I’m left wondering if similar criteria isn’t being applied in that selection process.
According to the research, it’s a good news/bad news scenario for the accounting profession.
Huron found the number of accountants on the nation’s audit committees has nearly doubled over the last four years -- since the passage of Sarbanes-Oxley into law.
In its analysis, Huron found that the number of audit committees with at least one accountant increased from 11 percent in 2002, to 20 percent in 2005.
Another positive from the study, which surveyed some 700 audit committee members at 178 public companies, is that the average frequency of audit committee meetings is rising.
That’s the good news.
Conversely, two-thirds of the companies they polled did not have one accountant sitting on their 2005 audit committees.
In fact, of all companies who last year reported having an audit committee member with “financial expertise,” just 23 percent of said financial experts came from accounting backgrounds.
That’s not so good news.
Now I realize that having a CPA sit on an audit committee is not a panacea against accounting fraud or even a restatement.
Nor is “financial expertise” a corporate euphemism for CPA, as I’m sure there are many capable audit committee members who are not members of the accounting profession but are nonetheless, well versed in financial matters.
But it’s also reasonably accurate to assume that an accountant has a pretty fair handle on the schematics of the audit process, as opposed to say, the head of human resources, marketing, or even an executive vice president who for example didn’t come up through the finance side.
Therefore, it would stand to reason that most companies serious about audit integrity and internal controls would ideally, like to, or should have, have at least one member who’s an accountant, if for nothing else than to spot red flags more quickly or to answer questions from those members who are not as experienced.
But I guess when considering the 2002 baseline audit committee makeup, even a modicum of progress is cause for optimism. In any event, I’ll await the 2006 results.
By the way my first meeting of the fire sprinkler committee is next week, so I want to make sure I’m prepared.
Now sprinklers are those spiral-like fixtures in the ceiling and not those bright red canisters hanging on the wall.
Right?
