Proposed SEC Rules Re Audit Committee

By Jared Kopel

On October 7, the SEC proposed new rules and amendments to current rules concerning the duties and functions of audit committees of corporate boards of directors. The proposals are largely based on the recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees.

In summary, the SEC's proposals would:

• require that independent auditors review the financial information included in Quarterly Reports on Form 10-Q or 10-QSB prior to filing with the SEC. The reviews would conform to the present requirements of SAS 71. (It should be noted that the BRC recommended that SAS 71 be amended to require that audit committees discuss with the auditors the matters covered in SAS 61, including significant adjustments, management judgments and accounting estimates, significant new accounting policies, and disagreements with management).