Abstract

http://ssrn.com/abstract=1438150
 
 

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Strengthening the Financial Reporting System: Can Audit Committees Deliver?


Jean Bédard


Université Laval - École de comptabilité

Yves Gendron


Université Laval

July 23, 2009


Abstract:     
This paper reviews literature on audit committees in order to evaluate the extent to which committees are effective in terms of strengthening financial reporting. Specifically, we examine academic research on the topic of audit committee effectiveness published in a variety of accounting journals from 1994 until 2008. In particular, our review investigates from a meta-perspective the results reported in studies which examine the relationship between certain audit committee characteristics and measures of audit committee effectiveness. A large proportion of the studies report a positive association between effectiveness and the following characteristics: presence of the audit committee; audit committee members’ independence; and members’ competencies. However, the number of meetings and the size of the committee are not frequently associated positively with audit committee effectiveness. Our review also highlights important gaps in literature. Most studies are relational and explanatory; very few studies are exploratory, descriptive or transformative. Psychological and sociological perspectives of analysis are neglected. Knowledge is scant on audit committees in jurisdictions which do not follow the Anglo-Saxon model of corporate governance. Further, research on dynamics surrounding audit committee processes is scarce. As a result of these gaps in literature, our review aims to sensitize accounting researchers about the appropriateness of extending the boundaries of research on audit committees: methodologically, theoretically, and geographically speaking. Further, by summarizing research results on the effectiveness of various audit committee attributes, our review can be useful for regulators in terms of assessing the impact of extant regulation or in terms of implementing new regulation. Regulators and practitioners, however, should be careful in interpreting the results; 59 percent of the studies we reviewed focus on US public companies and most of the other studies rely on data gathered in countries characterized by the Anglo-Saxon model of corporate governance.

Number of Pages in PDF File: 66

Keywords: Audit committee, Corporate governance, Effectiveness, Regulation, Review of literature

JEL Classification: G34, G38, M40

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Date posted: July 23, 2009  

Suggested Citation

Bédard, Jean and Gendron, Yves, Strengthening the Financial Reporting System: Can Audit Committees Deliver? (July 23, 2009). Available at SSRN: http://ssrn.com/abstract=1438150 or http://dx.doi.org/10.2139/ssrn.1438150

Contact Information

Jean Bédard (Contact Author)
Université Laval - École de comptabilité ( email )
2325, rue de la Terrasse
Québec, Quebec G1K 7P4 G1V 0A6
Canada
418-656-7055 (Phone)
418-656-2624 (Fax)
Yves Gendron
Université Laval ( email )
Quebec G1K 7P4
Canada
418-656-2431 (Phone)
418-656-7746 (Fax)
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References:  130
Citations:  5

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