The Conrad Black trial has been good theatre, and the latest coming out of Chicago doesn’t disappoint.
Testifying at the trial of former Hollinger chairman Conrad Black, a former member of the company’s audit committee has testified that it kept watch over company finances for four years without any financial experts.
Economist Marie-Josee Kravis, sat on the committee during the time that Black allegedly helped steal $60m (£30m) from the company.
She said that no one on the audit committee between May 1999 and May 2003 had the financial experience required by its governing charter.
Kravis is referring in part (I’m assuming) to the best practices of an audit committee as outlined by the AICPA, which stipulate at least one member of the audit committee be designated a financial expert. The decision tree to determine whether a member qualifies as a financial expert can be found here (PDF).
Basically a financial expert is someone who is an accountant or auditor, has taken an accounting or auditing program or course, has experience in auditing or as a controller or financial officer of a company, has experience assessing a company’s financial statements, or has experience supervising the accounting function in a company.
On top of that, they must be familiar with GAAP, the function of an audit committee, internal controls, and how those apply to the company in question.
My question is: Why would you want anyone who doesn’t meet those standards on the audit committee?