Publication Type
Conference Paper
Version
submittedVersion
Publication Date
6-2014
Abstract
Using the exogenous reforms to audit committees mandated by the Sarbanes-Oxley Act of 2002 and a difference-in-difference approach, we examine the impact of changes in audit committee attributes (financial expertise, size, and independence) on firms’ audit inputs and financial reporting quality. Firms directly affected by the reforms experienced a larger improvement in audit inputs (measured by audit fees and the appointment of an industry specialist auditor) and a larger increase in financial reporting quality (measured by restatements of financial reports) relative to firms that were already compliant. Importantly, we find that the decline in restatements is not related to the improvement in audit inputs. This suggests that larger, more independent, and more competent audit committees are better able to detect misstatements or deter opportunistic reporting by management, independent of the level of audit input quality. The results therefore provide justification for the audit committee reforms.
Keywords
Audit committees, Audit fees, Industry specialist auditors, Restatements, Endogeneity
Discipline
Accounting | Corporate Finance
Research Areas
Corporate Reporting and Disclosure
Publication
2014 Canadian Academic Accounting Association (CAAA) Annual Conference
First Page
1
Last Page
56
City or Country
Edmonton, AB
Citation
KIM, Jae Bum; SEGAL, Benjamin; SEGAL, Dan; and ZANG, Yoonseok.
The Triangular Relationship Between Audit Committee Characteristics, Audit Inputs, and Financial Reporting Quality. (2014). 2014 Canadian Academic Accounting Association (CAAA) Annual Conference. 1-56.
Available at: https://ink.library.smu.edu.sg/soa_research/1238
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.