Recent history of corporate audit committees

              The Accounting Historians Journal
Vol. 13, No. 2
Fall 1986
Brenda S. Birkett SOUTHERN UNIVERSITY
THE RECENT HISTORY OF CORPORATE AUDIT COMMITTEES
Abstract: This article explores factors in the financial, legal and social environ-ments that have significantly influenced the development of corporate audit committees. Particular emphasis is given to the actions of the Securities and Exchange Commission and the American Institute of Certified Public Accountants.
The New York Stock Exchange (NYSE) decision requiring that all listed corporations have audit committees as of June 30, 1978, made audit committees an integral part of the corporate organi-zation.
The concept of an audit committee is not new. Audit committees first attracted attention in the late 1930's when the Securities and Exchange Commission (SEC) and New York Stock Exchange en-couraged their establishment after the McKesson and Robbins case. In recent years there has been a significant increase in the number of corporations that have formed audit committees [AICPA, 1978]. A 1970 survey by R. K. Mautz and F. L. Neuman showed that 32 percent of the corporations responding had audit committees, while a repeat of the survey in 1976 showed that 87 percent had audit committees [Mautz and Neuman, 1977]. Congress, the SEC, the accounting profession and others have expressed an interest in and support for audit committees.
Actions of the Securities and Exchange Commission
In 1940, the SEC first recommended the establishment of audit committees in Accounting Series Release No. 19. This was issued in response to the McKesson and Robbins, Inc. investigation. The release proposed that, to assure auditor independence, a com-mittee be selected from non-officer board members to nominate auditors and arrange details of the engagement.
In Accounting Series Release No. 123, issued March 23, 1972, the SEC stated its long interest in corporate audit committees, and concluded with the following statement: