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Essay / Research Paper Abstract
A 6 page paper that discusses why a company does not need an 'independent' audit committee if 'independent' is interpreted to mean external. This essay discusses the roles of the corporate board's audit committee and how these roles have changed over the years. The writer concludes there are sufficient regulations and requirements from the SEC and the exchanges to assure the independence of the board's audit committee. Bibliography lists 4 sources.
Page Count:
6 pages (~225 words per page)
File: MM12_PGaudcm.rtf
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Unformatted sample text from the term paper:
the corporation would have to retain an external audit committee. This is not necessary because: 1.) the audit committee is a committee directly under the board of directors; 2.) the
audit committee is supposed to be independent insofar as this committee is not subject to managements whims; and 3.) corporations are required to engage external auditors for their annual fiscal
reports, external auditors also report on the fiscal practices of the company. The following discussion will clarify these points. Audit committees are one of the three committees of corporate
boards. The other two are governance and compensation. The Securities and Exchange Commission (SEC) recommended audit committees in the early 1940s but it was not until the late 1950s
that corporate boards began to establish audit committees as part of the governance structure for the company (Kalbers and Fogarty, 1998). The percentage of corporations that have audit committees rose
from 10 percent in 1958 to almost 40 percent in 1972 to more than 90 percent in 1982 (Kalbers and Fogarty, 1998). The reason for the surge in adopting audit
committees had to do with the vast number of fraudulent reporting cases and the abuses found in selecting accounting methods over those decades (Kalbers and Fogarty, 1998). It became clear
that management was not demonstrating effective and complete accountability responsibilities to their boards of directors (Kalbers and Fogarty, 1998). Establishing audit committees was an attempt to designate responsibility for accounting-related
issues, to supervise relations with the corporations external auditor and to provide a stronger reporting structure that could circumvent managerial retribution (Kalbers and Fogarty, 1998). In the 1980s, the SEC
forced a number of corporations to adopt audit committees to remedy their auditing practices (Kalbers and Fogarty, 1998). It was in 1978 that audit committees were mandated for New York
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