Groupon revised its fourth-quarter results last month, its first results posted as a public company, trimming revenue by $14.3 million. The company also said it found a material weakness in controls over its financial statements.

Fast-growing Groupon has said the latest accounting problems stemmed from a move into higher priced coupons, which led to more customer returns and refunds than anticipated.

The company sells discounted coupons online, keeping part of the money that customers pay for the coupons, with the rest going to participating merchants.

Groupon has asked an external auditor to look into the causes of its internal control weakness and has said it will beef up its own finance staff.

But corporate governance experts questioned the financial background of the Groupon board's audit committee, which is supposed to oversee both its auditor and the company's own accountants.

Groupon spokesman Paul Taaffe said the audit committee has met regularly to address accounting issues since the company discovered in February that the refund rate had increased.

Committee members "were in contact with each other, the audit firm and management continuously," he said.

Members of the audit committee declined comment.

Groupon already had been criticized by some analysts and investors for aggressive accounting before it went public in November. Under questioning by the U.S. Securities and Exchange Commission and accounting experts, Groupon changed its accounting practices twice before the initial public offering.

'MORE FINANCIAL EXPERTISE'

"Groupon needs a new audit committee with much more financial expertise," said James Post, a management professor at Boston University.

Some accounting experts said it would have been daunting to estimate the reserves needed for refunds.

"In a new business it's difficult to evaluate, because you don't know the behavior of your customer," said Wendy Stevens, a partner at accounting firm WeiserMazars.

Groupon's rapid growth also made it difficult to keep tabs on internal controls, accounting experts said. The company has expanded to 45 countries since it was launched in Chicago in 2008 and has increased its employees from a handful to 10,000.

With that much growth "there is little doubt that internal controls are not working somewhere," Edward Ketz, an accounting professor at Pennsylvania State University, and Anthony Catanach, an accounting professor at Villanova University, wrote in a blog post last week.

Groupon's audit committee is not lacking business experience. It includes heavy-hitters such as Howard Schultz, chief executive of Starbucks Corp.

Its audit committee chairman, Ted Leonsis, is a former AOL executive and chief executive of Monumental Sports & Entertainment, owner of several professional sports teams.

The third member, Kevin Efrusy, is an entrepreneur and founder of IronPlanet, an online market for heavy equipment.

CEOs are a plus for audit committees because they have the stature to ask tough questions of a company's management and auditors, corporate governance experts said.

But they can be overburdened in the role of audit committee chairman, one of the most demanding on a corporate board.

Heading Groupon's audit committee is not Leonsis's only board duty. He is also on the technology committee of Alcatel-Lucent SA and the boards of Clearspring Technologies, American Express Co, Rosetta Stone Inc, NutriSystem Inc, Georgetown University and two charities, according to a bio on Monumental's website.

A spokesman for Leonsis declined comment.

AUDIT PANEL ENGAGED

Groupon spokesman Taaffe said the committee has been fully involved in overseeing the company's accounting, from its IPO through the earnings revision.

The committee was also involved in a decision to bring in a team of actuaries who created a new model to better estimate future customer refunds, he said.

Meanwhile, legal headaches are mounting as investors try to recover losses. Groupon's directors, including its audit committee, have been named as defendants in multiple lawsuits filed against the company since it disclosed its control weaknesses on March 30.

Groupon's shares are down by more than a third from their IPO price of $20, closing at $13.08 on Wednesday on Nasdaq.

Shoring up audit committees was a key goal of 2002's Sarbanes-Oxley accounting reform act, passed by Congress after accounting scandals at WorldCom and Enron. To make audit committees better financial watchdogs, the act required them to be independent from management and made clear they had the authority to hire their own accounting advisers.

Nasdaq, where Groupon is listed, requires at least one audit panel member to have "financial sophistication," either from experience in finance or accounting, or comparable experience.

But Nasdaq says that requirement can be met by someone meeting the SEC's definition of "financial expert," a term broadened in final SEC rules issued in 2003.

Originally limited to people with accounting or finance experience, the SEC changed the rules to include chief executives who had supervised finance or accounting staff.

Groupon has said Leonsis meets the SEC's definition of a financial expert.

EX-CFOs OR AUDITORS FAVORED

Even so, Groupon would benefit from having at least one person on the audit committee with deeper finance experience, such as an accountant or chief financial officer, corporate governance experts said.

"It is best practice to have at least one such director on the audit committee, as not having such expertise has been shown to lead to the very problems experienced by Groupon," said Paul Hodgson, senior research associate at GMI Ratings, a corporate governance ratings agency.

The rules for audit committee qualifications need to be tightened, said Dennis Beresford, an accounting professor at the University of Georgia.

"It would be better for companies to have someone who can speak accounting and auditing, speak GAAP and GAAS," he said, referring to generally accepted accounting principles and generally accepted auditing standards.

Many companies follow the original intent of Sarbanes-Oxley and have at least one person with accounting or financial experience, said Charles Elson, director of the center for corporate governance at the University of Delaware.

"That's why you see so many retired auditors on audit committees these days, or retired chief financial officers," he said.

But that is no guarantee that the committee will ferret out problems.

"Just because you have a financial expert on the committee doesn't mean problems don't occur," Elson added.

(Editing by Kevin Drawbaugh and Andre Grenon)

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