The Changing Role and Responsibilities of Audit Committees in the United States Page: 70
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Encompassed within these attitudes are arrogance and self-serving that has a real
potential for bad corporate governance, and for which boards had little or no ability, or
desire, to correct.
Audit Committee Formation Prior to 1967
Mautz and Neumann (1970b) cite Loomis in their extensive research into the
formation of audit committees, pointing out the problem faced by boards with increasing
frequency in this period.
On the one hand, the director is increasingly the target of lawsuits that seek to
hold him to higher standards of accountability for his decisions and his actions.
On the other hand, he inhabits a world in which the decisions are bigger and
more complex, and the action faster - a world in which even the most
conscientious and resourceful men necessarily can have only limited
comprehension of some decisions for which they are held accountable.
(Loomis, cited in Mautz and Neumann 1970b, 3)
Blair (1950, 110) points out a remedy to this problem that board members, particularly
outside board members, employed. He asserts that through the use of active
committees, the board can effectively subdivide the complexities and alleviate the
limited amount of comprehension. "One idea which would appear to mitigate some of
these difficulties of directors is the corporate audit committee" (Mautz and Neumann
1970b, 7).
In spite of the reasonableness of this approach, the audit committee concept was
not implemented in large numbers prior to the AICPA's Executive Committee
endorsement in 1967 (Marget 1978). Percentages of corporations with audit
committees in this time frame varied widely. Apostolou and Jeffords (1990, 1) cite
unspecified surveys conducted "prior to 1970" as indicating that "fewer than half of the
public organizations" within the United States had formed audit committees. Carey70
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Teed, Dan Graham. The Changing Role and Responsibilities of Audit Committees in the United States, dissertation, August 2010; Denton, Texas. (https://digital.library.unt.edu/ark:/67531/metadc30519/m1/78/: accessed April 23, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; .