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<b>A prescription that may weaken the patient</b>

    Headline: A prescription that may weaken the patient
Source: Euromoney
Date: April 2000
Author: Mark Kessel

The Securities & Exchange Commission wants to impose new responsibilities on audit committees, but the potential liability might put off the highly qualified people companies need to attract.

After a year-long campaign against accounting abuses that inflate earnings, the US Securities & Exchange Commission (SEC) has issued its long-awaited directives concerning these "earnings management" practices. Companies may now feel these decrees provide them with guidelines to avoid the kind of SEC prosecutions that have earned brand-name companies unwanted publicity - not to mention attacks from the plaintiff bar.

They may be wrong.

One of the "hot buttons" for SEC chairman Arthur Levitt has been a company's audit committee, which is responsible for policing financial statements. Examples abound, he charges, of committees whose members hardly ever meet, lack expertise in the basic principles of financial reporting or don't have a mandate to really probe for problems. "Qualified, committed, independent and tough-minded audit committees," he said, "represent the most reliable guardians of the public interest."

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