Research Paper on:
Independent Auditing Committees and Businesses

Unformatted Sample Text from the Research Paper:
the corporation would have to retain an external audit committee. This is not necessary because: 1.) the audit committee is a committee directly under the board of directors; 2.) the  audit committee is supposed to be independent insofar as this committee is not subject to managements whims; and 3.) corporations are required to engage external auditors for their annual fiscal  reports, external auditors also report on the fiscal practices of the company. The following discussion will clarify these points. Audit committees are one of the three committees of corporate  boards. The other two are governance and compensation. The Securities and Exchange Commission (SEC) recommended audit committees in the early 1940s but it was not until the late 1950s  that corporate boards began to establish audit committees as part of the governance structure for the company (Kalbers and Fogarty, 1998). The percentage of corporations that have audit committees rose  from 10 percent in 1958 to almost 40 percent in 1972 to more than 90 percent in 1982 (Kalbers and Fogarty, 1998). The reason for the surge in adopting audit  committees had to do with the vast number of fraudulent reporting cases and the abuses found in selecting accounting methods over those decades (Kalbers and Fogarty, 1998). It became clear  that management was not demonstrating effective and complete accountability responsibilities to their boards of directors (Kalbers and Fogarty, 1998). Establishing audit committees was an attempt to designate responsibility for accounting-related  issues, to supervise relations with the corporations external auditor and to provide a stronger reporting structure that could circumvent managerial retribution (Kalbers and Fogarty, 1998). In the 1980s, the SEC  forced a number of corporations to adopt audit committees to remedy their auditing practices (Kalbers and Fogarty, 1998). It was in 1978 that audit committees were mandated for New York