Audit Committee Handbook, 4th Edition
By Louis Braiotta, Jr.
Wiley, ISBN: 0-471-48884-4; $75.00 hardcover;
Reviewed by Vincent J. Love
Braiotta’s fourth edition of this superb reference addresses
the full range of responsibilities of an audit committee,
including new requirements under the Sarbanes-Oxley Act of
2002. Numerous recent financial statement frauds at major
corporations, and the higher standards to which boards of
directors and their audit committee members are now held,
make this book an excellent resource even for practitioners
that do not currently serve on an audit committee or audit
a public company. I highly recommend this book as a worthwhile
addition to any professional library, or as a handout to members
of audit committees.
not an easy read, this book is an effective reference. The
guidance is relevant to all audit committees, not just those
of public or for-profit entities. Anything about the organization,
function, responsibility, liability, and reporting of an
audit committee will be found here. As in previous editions,
it also covers the basics of accounting, auditing, and reporting,
including ample references to the professional and other
chapter’s section on “sources and suggested
readings” allows the reader who wants more information
to delve deeper. With this edition, many of the appendices,
including an excellent glossary and excerpts from the standards,
regulations, and rules relevant to audit committees that
formerly were included in the book, have been placed on
a website for easy access and updating.
book comprises four parts:
Getting acquainted with your responsibilities;
The planning function of the audit committee;
The monitoring and reviewing functions of the audit committee;
The reporting function and the audit committee.
first part starts with the chapter “Corporate Accountability:
The New Environment,” an introduction to what’s
new since the last edition. It aggressively tackles the
new rules and regulations coming out of the Sarbanes-Oxley
Act (SOA), addressing the responsibilities of the audit
committee, its function, size, membership, and role in the
internal and external audit processes. Flowcharts, tables,
checklists, and similar excellent exhibits are found throughout.
These will be extremely useful to audit committee members
in understanding and effectively executing their duties
and responsibilities. They will also assist external auditors
in counseling committee members and evaluating the activities
of the committee when assessing the internal control environment.
1 also addresses the basic roles and responsibilities of
an audit committee, the users of the accounting information
made public by an entity, legal issues involving audit committees,
and an overview of accounting and auditing. The checklist
on minimizing the audit committee’s legal liability
is a must-read for any potential member of an audit committee.
2 discusses audit planning and the audit committee’s
participation therein. It includes an example of an auditing
cycle and an exhibit on risk factors relating to misstatements
arising from fraudulent financial reporting. It also addresses
subjects such as the audit committee’s role in planning
the audit and recommending the appointment of the independent
auditor. The comprehensive checklist of the key SOA provisions
related to audit committees is a must-have tool.
3 focuses on the monitoring and reviewing functions of the
audit committee, which have become more prominent with SOA’s
impact on the establishment, monitoring, and reporting on
internal control, as well as its increased emphasis on the
financially knowledgeable members of the audit committee.
This section addresses topics related to the company’s
system of internal control, the internal audit function,
accounting policy disclosures, fraud and the auditor, and
general business practices such as questionable foreign
payments and corporate perquisites—those benefits
received by the senior officers of the company that have
been the subject of sensational litigation and investigative
final section includes information and guidance on the external
auditor’s reports and the audit committee’s
own report to the board on its activities. The chapter on
the external auditor’s report is designed to familiarize
the audit committee with the types of audit opinions given,
reporting on interim financial statements, and special reports.
With the new SEC requirements, many mandated by SOA, the
chapter on reports assumes new and greater importance. It
contains information and examples that will be very helpful
to an audit committee when it prepares its own report to
its full board of directors. The author concludes with observations
on the dynamic changes in the importance, duties, and responsibilities
of the audit committee. Change is good, but it must be effective
J. Love, CPA, is managing partner of Kramer, Love
& Cutler LLP, of New York City. He is also a member of
the NYSSCPA’s Legislative Task Force and its Quality
Enhancement Policy Committee.