When one considers the corporate bureaucracy designed to ensure good corporate citizenship, the audit committee stands out. No committee of the board has the broad ranging purview of the audit committee, and those powers and duties have expanded over the years. With great power, however, comes great responsibility.
Since March 2010, the U.S. Securities and Exchange Commission (SEC) has brought four suits against the members of audit committees of public corporations, alleging that they were not independent and thus allowed others to engage in securities and other frauds. In class actions, derivative suits, and other private civil litigation, naming the members of the audit committee has become routine, even where the audit committee has taken action to investigate and remediate wrongful conduct. As greater reliance is placed on audit committees, not only with regard to the financial statements but also with regard to internal controls, legal compliance policies and programs, risk management, and investigation of alleged wrongdoing, the likely liability horizon for audit committee members has expanded.
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