Public company audit committee members might be forgiven for sweating potential Securities and Exchange Commission (SEC) scrutiny of late. In the last three years, the commission has given renewed attention to audit, accounting, and financial reporting misconduct, more than doubling the number of enforcement actions in that space.1 At the same time, the commission has emphasized that it intends to hold individuals, particularly “gatekeepers,” accountable for such misconduct.2 In the SEC’s eyes, audit committee members fall squarely into the gatekeeper category, as recent speeches and enforcement actions have made clear.

Yet directors should not avoid audit committee service simply because the SEC might scrutinize their work. Enforcement actions against audit committee chairs are an “infrequent” occurrence,3 according to SEC Chair Mary Jo White, who also noted in a speech in March, that “judgments that directors make in good faith based on responsibly performing their duties will not be second guessed” by the commission.4 With that in mind, we examine the SEC’s focus on audit committee members as gatekeepers, review three recent enforcement actions to highlight conduct that attracts the staff’s attention to audit committee members, and suggest certain safeguards that might help audit committee members mitigate the chance of an SEC investigation or charge.

Why the ‘Sudden’ Attention?

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]