To properly understand the importance of the corporate director’s position on the audit committee, one must understand the nature and importance of the concept of corporate accountability in the new legal and regulatory framework under statutory law. Therefore, the major objectives of this chapter are: first, to revisit the meaning and significance of corporate accountability; second, to explain the significance of major audit committee developments in the context of corporate accountability with special emphasis on those of the past five years; and third, to show the impact of corporate accountability on the audit committee and its corporate relationships.
Although the recent failures of major corporations, such as Enron,WorldCom, and others, have accelerated the need for legal and regulatory reforms, the concept and meaning of corporate accountability in relation to the institution of the audit committee remains the same both before and after accounting scandals. However, with the enactment of the Sarbanes-Oxley Act of 2002, the substantive meaning of corporate accountability has caused many best practices for audit committees to become statutory law. Moreover, the new legislation has caused an institutional restructuring of the accounting profession as well as additional resources for the Securities and Exchange Commission (SEC) to curb abuses of fraudulent financial reporting.
