Corporate Audit Panels To Gain Power; SEC Passes New Rules
The Securities and Exchange Commission approved new rules yesterday that will increase the power and responsibility of corporate audit committees, in an effort to make it harder for managements to cook their books.</br></br>The commissioners voted unanimously to require that directors on audit committees -- and not management -- hire and fire outside auditors, and that no audit committee members be allowed to have consulting relationships or other financial ties with the corporation.</br></br>As accounting scandals have exploded over the past year, corporate governance experts have said that aggressive, independent audit committees, composed of financial and accounting experts who can deal directly with accountants, are necessary if directors are to spot red flags in financial reports.</br></br>"The audit committee is the bedrock on which corporate governance is built," said SEC Chairman William H. Donaldson. This was his first public meeting since taking office earlier this year.</br></br>"My hope is that this rule will help audit committee members to become more engaged, more inquisitive and better stewards of shareholders' property," said SEC commissioner Paul S. Atkins.