California Board of Accountancy
February 13, 2003
Jonathan G. Katz, Secretary
Re: Standards Related to Listed Company Audit Committees -
Dear Mr. Katz:
The California Board of Accountancy (CBA) commends the Commission for its prompt action in promulgating the proposed rule on Standards Relating to Listed Company Audit Committees. In general the CBA supports the proposed rule, which will strengthen the oversight role of audit committees and the independence of audit committee members. The CBA has the following specific comments concerning the proposed rule.
First, with regard to the proposed independence requirements, the CBA supports extending the requirements to cover a "look back" period before appointment of the member to the audit committee. The CBA recommends a one-year "look back" period, similar to the waiting period for employment of an auditor by the client in Section 206 of the Sarbanes-Oxley Act.
Second, with regard to the internal auditor responsibility requirement, the CBA encourages greater audit committee oversight and control over the internal audit function and personnel. The CBA does not believe that the audit committee should directly manage the internal audit function. However, the CBA supports broad audit committee oversight of such function, including the audit committee's right to review and approve any significant changes in internal audit operations, procedures, and personnel.
Also, the CBA agrees with the Commission's decision to not institute separate, lesser standards for issuers that are small businesses. Uniform standards will promote a level playing field and enhance investor confidence in the integrity of financial reporting.
Thank you for this opportunity to express our views. Should you have questions or need additional information, please contact Carol Sigmann, Executive Officer, at (916) 263-3980.
c: Members, PCAOB