Cambridge Biotech cleans house

The recent troubles at Cambridge Biotech Corp., whose auditors resigned after finding that certain revenues recognized in fiscal 1991 and 1992 did not appear to have been bona fide transactions, illustrates some of the limits a board of directors has in its oversight of management.

"We were caught completely unawares," said Jeffrey Beaver, who has been a director since 1983 and has stepped in as the interim president and CEO. "The ability of a board to scrutinize every transaction is pretty limited. The board has to rely on various other non-board people, such as the auditors. And when auditors are asked that question they have to rely on the information given them by the company and make checks that are reasonable."...