Chairing today's audit committee: in addition to financial expertise, what should boards be looking for in an audit chair? We have found a number of attributes and abilities that are critical.

• Author: Heid, Michele
• Position: HEIDRICK & STRUGGLES GOVERNANCE LETTER

The heightened attention and renewed importance of audit committees today have their origins in ac-coiiii ting scandals that occurred more than a decade ago. Sarbanes-Oxley and other regulations cast a bright spotlight on issues of auditing and financial reporting. Since that time, however, a worldwide financial meltdown, additional public scrutiny, continuing shareholder activism, and new regulation like the Dodd-Frank Wall Street Reform and Protection Act have made yesterday's narrow focus on auditing issues seem almost quaint.

Today's audit committee and its chair must address not only accounting and reporting, but also enterprise risk, regulatory compliance, capital structure and capital markets, and much else. Typically, audit committees meet more frequently than other board committees, spend additional time with outside auditors, and work closely with the CFO; and the responsibilities of the typical audit chair are correspondingly many, including:

* Scheduling committee meetings and establishing the agenda for each in consultation with the chairman of the board, committee members, management, and the external auditor.

* Ensuring that properly prepared financial statements, management discussion and analysis, and other appropriate documents to be reviewed by the audit committee are circulated prior to the meetings.

* Overseeing die hiring and independence of the external audit firm.

* Ensuring a direct line of communication between the committee and the external auditor.

* Overseeing the performance of the internal audit function.

* Ensuring that the committee complies with its obligations to the full hoard.

* Reviewing conflict of interest and independence issues as they arise and reporting such issues to the board's chairman.

These formal and procedural duties, however, do not begin to describe the challenge of presiding over a committee that must be broader and deeper than ever before, addressing an increasingly wider range of issues, each of which requires some degree of specialization. Moreover, the recent emphasis on risk and related issues will likely mean less focus on compliance and more focus on strategy, requiring strategic savvy on the part of the chair.

While it is a given that the audit chair must have the financial expertise and adequate time to devote to this role, it is equally important that this individual can bring value to the board and company beyond their functional expertise.

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