Here’s a tip from the sixth edition of our popular publication The Public Company Handbook, which is an easy-to-read guide that provides practical insights regarding legal and other board management issues facing public—or soon-to-be-public—companies.

The SEC has adopted a pragmatic definition of Audit Committee financial expert. Investment bankers, venture capital investors, stock analysts and others may qualify, along with finance professionals. An Audit Committee financial expert is a person who has all five of the following attributes:

1. Understands GAAP and financial statements;

2. Has the ability to assess the application of GAAP to accounting for estimates, accruals and reserves;

3. Has experience:

• Preparing, auditing, analyzing or evaluating financial statements with accounting issues comparable in breadth and complexity to those that can reasonably be expected to be raised in the company’s financial statements; or

• Actively supervising someone engaged in those activities;

4. Understands internal control over financial reporting; and

5. Understands Audit Committee functions.

The Board must determine that an Audit Committee financial expert has developed the five attributes through any combination of:

• Education and experience as a CFO, principal accounting officer, controller, public accountant or auditor performing similar functions;

• Experience actively supervising a person in those positions;

• Experience overseeing or assessing the performance of companies or public accountants regarding the preparation, auditing or evaluation of financial statements; or

• Other relevant experience that the Board determines to be adequate (and which it must publicly disclose).

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Photo of Stewart Landefeld Stewart Landefeld

Stewart Landefeld, partner and immediate past co-chair of the firm’s Corporate practice, has counseled corporations and board of directors for 30 years in the areas of corporate governance, securities compliance, mergers and acquisitions, public offerings, private equity investments and venture capital.

Stewart has…

Stewart Landefeld, partner and immediate past co-chair of the firm’s Corporate practice, has counseled corporations and board of directors for 30 years in the areas of corporate governance, securities compliance, mergers and acquisitions, public offerings, private equity investments and venture capital.

Stewart has provided corporate governance and other general corporate counsel to dozens of leading companies, including Microsoft Corporation, Costco Wholesale Corporation, T-Mobile, Tribune Publishing Company, Taylor Morrison Home Corporation, PetSmart Inc., Orbitz (Audit Committee), Aircastle (Independent Directors), F5 Networks, Intermec Inc., Outerwall Inc., The Seattle Mariners, The Tacoma Rainiers (Baseball Club of Tacoma, LLC) and The Seattle SuperSonics among others. Clients benefit from the valuable insight he gained after serving for nearly a year as interim Chief Legal Officer, of Washington Mutual Inc. during the financial crisis, as well as his decade of board leadership, including the Pike Place Market PDA, The Seattle Foundation, Plymouth Housing Group and the Seattle Art Museum.

Photo of Jason Day Jason Day

Jason Day is the firmwide chair of the Corporate practice and a member of the firm’s Executive Committee. Jason serves as a trusted advisor to public companies on their most sensitive securities and corporate governance matters. He regularly counsels public company boards of…

Jason Day is the firmwide chair of the Corporate practice and a member of the firm’s Executive Committee. Jason serves as a trusted advisor to public companies on their most sensitive securities and corporate governance matters. He regularly counsels public company boards of directors and management on SEC disclosure obligations, fiduciary duties, internal investigations, proxy advisory firm standards and stockholder activism matters.

Jason has represented issuers and underwriters in dozens of capital markets offerings, including underwritten equity and debt offerings, initial public offerings, Rule 144A offerings and convertible note offerings, among others. He also counsels companies and their boards on public company change in control transactions, including mergers, tender offers, and SPAC transactions.