These new disclosures and qualifications will cause potential audit committee members to ask whether they should expose themselves and their personal assets to such liability. No. 1 APTC, therefore, recommends that these new requirements be reviewed more extensively before any implementing decision is reached. In this context, it is important to make a larger point and distinguish between the roles of the auditors and the audit committee. A person with a thorough understanding of a business brings a useful perspective to overseeing the auditors. Moreover, a focus on each individual member of the audit committee distorts the basic idea of a committee .
Committees act collectively.
Their authority is based on collective work. It is the collective financial literacy of the entire committee that matters. Therefore, we recommend that the proposed requirements regarding individual financial acumen be replaced with a requirement that the collective financial acumen of the committee meet a required standard. This will allow boards to retain some discretion in appointing audit committees. It may also reduce the importance of every single audit member s ability to withstand cross-examination by class action plaintiffs lawyers.