August 31, 2015
I am currently the chair of the audit committee of two public companies. I also chair the board of one of the companies. I am a CPA. My work experience includes an audit partner with a big eight accounting firm, a Corporate Controller, CFO, President, and board member of a public company. I qualify as a "financial expert" on the audit committees of the two companies for which I serve as the chair of the committees. In my present position I serve as the principal communication link between the auditors and the audit committees. I am responding to the SEC Concept Release on Audit Committee Disclosures.
In my view the Commission is searching for a solution to a problem that doesn't exist. Having been around audit committees in one capacity or another for the past 40 years, I have never seen the relationship between auditors and audit committees so strong and, more importantly, so objective. Sarbanes-Oxley was a very significant step forward in the development of this very open and objective relationship. It made clear that the auditors are responsible directly to the audit committee (as opposed to management) and that audit committees have the responsibility to hire and fire the auditor. And it significantly "freed up" the communications between the parties by setting some clear cut requirements for audit committees in dealing with auditors.
With the current excellent working template for audit committees and auditors there is nothing to be gained by requiring further disclosures of the communication with and oversight of the auditor by audit committees. In fact, in my view such requirements would "chill" the now excellent interaction between the two parties.
Shareholders and investors are only concerned that the auditors are a reputable and known firm and that their audit committees are comprised with competent and independent directors who meet the requirements of the SEC regarding financial acumen etc. So any further disclosures referred to in the Concept Release would be of no interest to the shareholders and investors.
Finally, and not related to the Concept Release, if the SEC really wanted to improve audit committees here is a suggestion. Require that the committee have a "financial expert" as its chair. And strengthen the definition of "financial expert" to eliminate the ability of a non-financial person to qualify as a "financial expert" simply because said person "supervises or supervised" a financial person. The SEC missed the boat with the adoption of Sarbanes-Oxley by "watering down" the definition of a "financial expert" in its final release, in my opinion. It is not difficult to find real "financial experts" as board members these days and this change is very doable and would be very productive.
Respectfully submitted,
Boh Dickey
Retired President and COO, Safeco Corporation (now part of Liberty Mutual)