We think the key to a good audit committee is not more process or more rules. Reducing the pool of available audit committee members reduces the pool of good ones. Therefore, in net effect, the new requirements will be counterproductive to the goal of better audit committees. When the pool of eligible audit committee members shrinks because of inflexible requirements, smaller companies and their shareholders are disadvantaged to a greater degree than large companies. However, APTC believes it is appropriate to apply whatever changes are required to all companies, regardless of size.
All companies are susceptible to manipulation by fraudulent individuals.
An investor can lose just as much money from fraudulent financial reporting in a small company as in a large one, and investor confidence is a variable in the cost of capital. Therefore, the Association does not advocate a second tier of audit committee requirements based on company size. If a new practice or requirement is universally helpful in preventing fraud, it should apply to all public companies. On the other hand , if a new structural or procedural requirement is largely cosmetic or, would be counterproductive to good audit oversight, a minimal cost burden should not matter. Finally, the Association rejects the notion that the Securities Exchange Commission should use its influence over listing standards, or its power to compel disclosure as tools to change corporate behavior.