Enron’s Demise: Look at Audit Committees

“Fling Open the Enron Mess” (editorial, Dec. 9) reflects the sense of incredulity many of us have when trying to explain the sudden downfall of this innovative, publicly held corporation and correctly asks what should be done to prevent the kind of fraudulent financial reporting that apparently has taken place.

Let me suggest another place to look: the audit committee of the board of directors. Although primary responsibility for a company’s financial reporting lies with senior management, it is supposed to be overseen by the board through its audit committee. It behooves investors to look more closely at annual proxy statements to see whether there is a charter statement for the audit committee that spells out its duties, its interactions with the external audit firm and its efforts to assess the risk of improper or potentially misleading reporting. A well-defined audit charter suggests that clean reporting is something that the board has put out there as a serious priority in the way it does business, not window dressing.

Sidney F. Tyler

Pasadena