Directors divided on audit reform

Many directors said they were already planning changes in their internal financial reporting and monitoring processes, according to the NACD survey in late January, commissioned to gauge US directors’ opinions on issues raised by Enron’s collapse.

They viewed understanding derivatives risk and the accuracy of disclosures related to derivatives and off-balance-sheet liabilities as vital, the survey found.

But opinion was polarised about the best route forward to develop regulatory oversight of financial reporting and disclosure. Only 37.3% of respondents favour the US Securities and Exchange Commission’s proposal to establish a new public group to monitor external auditing, while 35.1% of directors oppose the proposal. The latter favour better self-regulation.

The NACD was founded in 1977 and has 11,000 members. It is a non-profit organisation dedicated exclusively to enhancing director effectiveness through research and education.