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Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success by Richard M. Steinberg

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Financial Reporting

We see every day how the marketplace eagerly awaits and reacts in force to information about companies' performance and future prospects. Of course, overseeing the financial reporting process and resulting financial statements and related issuances is a key board responsibility. While financial reporting is perhaps viewed as somewhat more mundane than other board roles, certainly its importance is well understood inside and outside the boardroom.

A board's responsibility for overseeing external financial reporting has long been delegated to the audit committee, which carries out the role on behalf of the full board. In recent years, however, with evolving federalization of governance, the audit committee has become an entity unto itself, with laws and regulations outlining what it needs to do.

There's no doubt that serving as an audit committee member of a corporate board is among the most challenging roles in today's business environment. Responsibilities have expanded, market expectations have heightened, and stress levels have intensified. Ever since the Sarbanes-Oxley Act of 2002 was enacted and related SEC regulations and stock exchange listing standards were codified, audit committee members have been struggling with their elevated roles. Even experienced directors, some of whom initially surmised there would be little difficulty in audit committee service, have wrestled with issues of process and scope for the committees' activities.

Indeed, many audit ...

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