The Long-Run Implications of Audit Committee Overboarding on Auditor Contracting and Financial Reporting Quality

The Long-Run Implications of Audit Committee Overboarding on Auditor Contracting and Financial Reporting Quality
Author: Jack Castonguay
Publisher:
Total Pages: 49
Release: 2019
Genre:
ISBN:
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Since the passage of the Sarbanes-Oxley Act (SOX) there has been a concern amongst regulators and the investing community that overboarded audit committees, those with members holding multiple other board seats, are unable to effectively monitor the companies they represent. I find these concerns unwarranted. Results indicate that more overboarded audit committees have adequately adjusted to their increased workloads in the decade since SOX to such a degree that they have lower misstatement frequencies than less overboarded committees. Initially through contracting with their auditors and later by moving along their own learning curve, more overboarded audit committees have found responses that aid in their monitoring, leading to higher quality financial reporting. Overall, I find that more overboarded audit committees perform effective monitoring despite members serving on multiple other boards. Results suggest that reputational concerns and preserving opportunities for future board nominations outweigh the time constraints associated with being more overboarded.

The Association Between Audit Committee Overboarding, Audit Committee Responses to Increased Workloads, and Financial Reporting Quality After SOX

The Association Between Audit Committee Overboarding, Audit Committee Responses to Increased Workloads, and Financial Reporting Quality After SOX
Author: John Kyle Castonguay
Publisher:
Total Pages: 83
Release: 2017
Genre: Audit committees
ISBN:
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The Sarbanes-Oxley Act (SOX) added a multitude of financial oversight responsibilities to the audit committee of public companies. These responsibilities increased the amount of time each audit committee member needed to devote to each committee served, leading to concerns amongst regulators and the investing community that audit committees that were overboarded and serving on multiple other board seats would be unable to effectively monitor the companies they represented. I find that these concerns are undue. More overboarded audit committees have adequately adjusted to their increased workloads in the decade since SOX to such a degree that they have lower misstatement frequencies than less overboarded committees. By contracting in additional auditor effort or retaining higher quality auditors overboarded audit committees have found responses that aid in their monitoring. These responses lead to positive financial reporting outcomes when audit committees accept the limitations imposed by being overboarded. Overall, I find that more overboarded audit committees are able to remain effective monitors of the financial reporting process.

Audit Committees

Audit Committees
Author: Frank M. Burke
Publisher: CCH
Total Pages: 468
Release: 2008-08
Genre: Business & Economics
ISBN: 9780808091646
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The Effects of Audit Committee Financial Expertise on Auditor Changes and Subsequent Audit Quality

The Effects of Audit Committee Financial Expertise on Auditor Changes and Subsequent Audit Quality
Author: James D. Whitworth
Publisher:
Total Pages: 73
Release: 2010
Genre: Accounting
ISBN:
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My dissertation examines the impact of audit committee financial expertise on the circumstances and likelihood of an auditor change. Auditor changes are costly events associated with decreased financial reporting quality. The audit committee is in position to influence the timing and circumstances surrounding these changes through their role overseeing the external financial reporting process. I find that audit committees with greater accounting expertise are associated with fewer auditor changes overall, more auditor dismissals when there is an auditor change, greater industry expertise by the successor auditor, and an increase in financial reporting quality following the auditor change. I find no consistent evidence supporting the impact of supervisory expertise influencing any of the above outcomes.

Auditor Going Concern Reporting

Auditor Going Concern Reporting
Author: Marshall A. Geiger
Publisher: Routledge
Total Pages: 160
Release: 2021-06-09
Genre: Business & Economics
ISBN: 1000392031
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Auditor reporting on going-concern-related uncertainties remains one of the most challenging issues faced by external auditors. Business owners, market participants and audit regulators want an early warning of impending business failure. However, companies typically do not welcome audit opinions indicating uncertainty regarding their future viability. Thus, the auditor’s decision to issue a "going concern opinion" (GCO) is a complex and multi-layered one, facing a great deal of tension. Given such a rich context, academic researchers have examined many facets related to an auditor’s decision to issue a GCO. This monograph reviews and synthesizes 182 recent GCO studies that have appeared since the last significant review published in 2013 through the end of 2019. The authors categorize studies into the three broad areas of GCO: (1) determinants, (2) accuracy and (3) consequences. As an integral part of their synthesis, they summarize the details of each study in several user-friendly tables. After discussing and synthesizing the research, they present a discussion of opportunities for future research, including issues created or exacerbated as a result of the global COVID-19 pandemic. This monograph will be of assistance to researchers interested in exploring this area of auditor responsibility. It will also be of interest to auditing firms and individual practitioners wanting to learn what academic research has examined and found regarding this challenging aspect of audit practice. Auditing standard-setters and regulators will find it of interest as the authors review numerous studies examining issues related to audit policy and regulation, and their effects on GCO decisions. The examination of GCO research is extremely timely given the financial and business disruption caused by the worldwide COVID-19 pandemic. This unprecedented global event has caused companies, auditors and professional bodies to revisit and reassess their approach to going concern, and to think even more deeply about this fundamental business imperative.

Accounting and Auditing Oversight

Accounting and Auditing Oversight
Author: United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets and Government Sponsored Enterprises
Publisher:
Total Pages: 356
Release: 2013
Genre: Accounting
ISBN:
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The Audit Committee: Performing Corporate Governance

The Audit Committee: Performing Corporate Governance
Author: Laura F. Spira
Publisher: Springer Science & Business Media
Total Pages: 191
Release: 2007-05-08
Genre: Business & Economics
ISBN: 030647655X
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Why do we need to understand audit committees? The Cadbury Committee recommended that UK companies should adopt them in response to financial scandals that have stemmed from dubious financial reporting practices. In other countries, similar commissions have made similar recommendations and audit committees are now a common institution. However, many practitioners doubt whether an audit committee really does much to ensure the integrity of a firm's financial statements because, as outsiders, members don't know enough to dig deeply beneath the numbers. The Audit Committee: Performing Corporate Governance argues that such criticism overlooks the ceremonial function of these committees. The audit committee is an arena where members can form and strengthen shifting and fragmentary networks with each other and with the external auditors. Within these networks, both consensus and independence are demonstrated, generating comfort, which legitimises the company and maintains its access to external sources of capital. The audit committee is a key part of the corporate governance structure within an organisation. Many in the UK have been patched together to meet regulatory requirements and their operation is poorly understood because few people other than their members have access to their deliberations. In this account of the world of audit committees the practitioner will find the ethnographical perspectives on ceremonial performance, consensus, independence, and comfort both familiar and different. It's like looking at a photograph of something commonplace from an unusual angle or through a strange-shaped lens.

Audit Committee Formation in the Aftermath of 2007-2009 Global Financial Crisis, Volume II

Audit Committee Formation in the Aftermath of 2007-2009 Global Financial Crisis, Volume II
Author: Zabihollah Rezaee
Publisher: Business Expert Press
Total Pages: 190
Release: 2016-07-08
Genre: Business & Economics
ISBN: 1631571559
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The audit committee has gained considerable attention in the aftermath of 2007-2009 global financial crisis. The audit committee’s role has evolved from a voluntary liaison between management and external auditors to the standing committee of the board of directors in overseeing all aspects of corporate governance, financial reporting, internal controls, risk assessment, and audit activities. This book addresses the determinants of audit committee oversight effectiveness, including their composition, independence, authority, resources, diligence, and activities. The book is organized into three separate volumes and each volume can be utilized separately or in an integrated form. The first volume consists of five chapters, which examine the relevance and fundamentals of the audit committees as well as the determinants of audit committee effectiveness. The second volume consists of nine chapters on financial, auditing, internal control, risk management, ethics and compliance, antifraud, and other oversight functions of the audit committee. The third volume consists of five chapters on the emerging issues of audit committees pertaining to evaluation, education, reporting, and accountability as well as audit committees of private companies, governmental entities and not-for-profit organizations.