Reference no: EM132946000

In this assignment, you are to select a public company you would like to know more about. Like the compensation discussion, find the most recent proxy statement for that company.

• In the proxy statement, locate the information of the board members who sit on the audit committee. Read the information about their background and information disclosed about the activities of the audit committee. Per SEC regulations, the audit committee must oversee the financial reporting function.
• Deliverable: Briefly summarize the credentials and activities of the audit committee members and the committee. Discuss your opinion about how good the members and overall committee are (from the disclosures) as monitors of management. Per SEC regulations, the audit committee must oversee the financial reporting function. Please comment on one other member of the group.

Some hints on what makes someone a good monitor that you might consider. This list is not exhaustive and not all of it may apply:

Problem 1. Are any of the members designated financial experts? Do they appear to be independent of management?

Problem 2. What makes them a financial expert? The SEC requirements on what makes a financial expert are not that detailed. A former audit partner is more of a financial expert than someone who was head of marketing (on average).

Problem 3. Do they have any special background they would make them especially appropriate for this company (former audit partner, former bank CEO, related industry experience, cybersecurity expert).

Problem 4. How often did the committee meet? Note that if they met a lot, they probably had an issue going on vs. a company that had a committee that only met quarterly. So more is not necessarily better than a few.

Problem 5. Do they provide a good description of their duties? Do they have a charter? Do they talk about monitoring of a whistleblowing hotline? Do they discuss how they do their job? Do they discuss who they met with? Do they talk about an internal auditor?

Problem 6. Did the company have a material weakness in internal controls (see 10K for this).

Problem 7. Part of the job is to hire the auditor and approve non-audit services. Were the non-audit services excessive? If so, does the audit firm appear independent? (in your opinion)