The Role of Audit Committees in Managing Relationships with External Auditors after SOX: Evidence from the US

48 Pages Posted: 8 Dec 2008

See all articles by Rani Hoitash

Rani Hoitash

Bentley University - Department of Accountancy

Udi Hoitash

Northeastern University - Accounting Group

Date Written: December 5, 2008

Abstract

Recent US reforms aimed at strengthening audit committees and their structure assign independent audit committees the responsibility to appoint, dismiss, and compensate auditors. We examine the association between audit committee characteristics and auditors' compensation and dismissals following the enactment of SOX. We observe that stronger audit committees demand higher level of assurance and are less likely to dismiss their auditors. Further, we find increase in auditor independence as measured by reduced board involvement and less dismissals following unfavorable audit opinion. Our overall results suggest that increased audit committee roles and independence after SOX contribute to auditor independence and audit quality.

Keywords: Audit Fees, auditor realignment, audit committee, corporate governance

JEL Classification: M49, G34, G38

Suggested Citation

Hoitash, Rani and Hoitash, Udi, The Role of Audit Committees in Managing Relationships with External Auditors after SOX: Evidence from the US (December 5, 2008). Available at SSRN: https://ssrn.com/abstract=1312024 or http://dx.doi.org/10.2139/ssrn.1312024

Rani Hoitash (Contact Author)

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452-4705
United States

Udi Hoitash

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States
671-373-5839 (Phone)

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