This Wisdom of the Crowd, compiled from responses posted on the Compliance & Ethics and Corporate & Securities Law eGroups,* addresses the topic of who participates in Audit Committee meetings.
*(Permission was received from the ACC members quoted below prior to publishing their eGroup comments in this Wisdom of the Crowd resource.)
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Question:
Who participates in your Audit Committee meetings other than committee members and do they stay for the entire meeting? Do your outside auditors participate in the entire meeting?
Wisdom of the Crowd
Response #1
Our outside auditors participate in the entire audit committee meeting, except the report from the GC on legal matters and the executive session of the committee members. We do those at every audit committee meeting. We also have a private session with the outside auditors and a private session with the GC at every meeting.1
Response #2
For our company, attendance at / participation in Audit Committee (AC) meetings is limited to AC members, certain staff (CEO, CFO, Director of Finance) and the auditors. It is a closed session; invited staff only. On occasion, we invite staff (other than the three positions listed) for specific issues on which their expertise is useful for the AC.
The last two items on the AC agenda are brief meetings (1) between staff and the AC (to discuss auditor performance), and (2) between the auditors and the AC (so the auditors can raise concerns re staff, etc.). This structure and agenda format have worked well for us.2
Response #3
At my prior company, the General Counsel, CFO and CEO generally sat in for the entire meeting (except for one-on-one sessions). As Chief Ethics and Compliance Officer, I attended (and presented at) part of each meeting. Our Director of Internal Audit attended my part of the meeting and I attended his presentation to the Committee. Our external auditors did not attend the entire meeting, but did sit in on my presentation and part of the presentation of our Director of Internal Audit. At least once a year I met with the Audit Committee without anyone else present.3
Response #4
We had our outside auditors, CFO and controller in attendance during the entire meeting. The internal auditor and compliance folks came in and out of the meeting during various points in time. After the meeting, the audit committee had one on ones with the outside auditors, CFO, controller, compliance officer and internal auditor as well.4
Response #5
Our CFO, Controller, and I attend and stay for the entire meeting except for the private session that takes place at the end of each meeting. Our outside auditors and outside counsel are also present for the entire meeting, generally including the private session.5
Response #6
The CEO (also the only non-independent Board member), President, CFO, Controller, Internal Auditor, External Auditors, General Counsel, and I regularly attend the entire meeting, except for the executive session and the separate sessions held seriatim, with management (CEO, President and CFO), external auditors and the internal auditor. This practice predates me; I have some concerns about the external auditors, who are third parties, attending during the report from the General Counsel on litigation matters. My perspective is that is the GC's opportunity to speak very candidly with the Audit Committee, including alternatives under consideration (pros and cons) or matters that may be trending but are not ready or ripe for disclosure, reserve or, even, discussions with the external accountants. We meet regularly at quarter end with the external auditors on litigation exposure, on reserves and on the auditor letter and keep them fully apprised under the current FAS 5 and ABA Accord standards, which should be enough. My concern is that their presence at that portion of the Audit Committee destroys privilege. As a consequence, whenever there is such a matter, we have had the GC call/meet with Audit Committee members outside of the formal meeting.6
Response #7
In the companies I have worked with, the CFO and GC typically attend the entire audit committee meeting outside of executive sessions. The CEO, Controller, head of internal audit, and head of financial reporting also attend from time to time depending on the agenda to be covered. Finally, outside counsel may attend, but this practice varies greatly by company. In my experience, the outside auditors generally do not attend the entire audit committee meeting. 7
1 James Brashear, General Counsel and Corporate Secretary, Zix Corporation (Compliance & Ethics, Jun. 4, 2013).
2 Colleen Struss, Director of Finance/CLO, AAAS/Science Magazine (Compliance & Ethics, Jun. 4, 2013).
3 Larry Parsons, Vice President, Ethics and Compliance, McLane Company Inc. (Compliance & Ethics, Jun. 4, 2013).
4 Rhonda De Stefano, Attorney (Compliance & Ethics, Jun. 4, 2013).
5 Denis J. Quinlan, General Counsel, Calix Inc. (Corporate & Securities Law, May 13, 2013).
6 Nancy Rights, Deputy General Counsel & Secretary, Frontier Communications Corporation (Corporate & Securities Law, Jun. 3, 2013).
7 Anonymous(Corporate & Securities Law, Jun. 3, 2013).