Audit Committee Compensation and the Demand for Monitoring of the Financial Reporting Process

Journal of Accounting and Economics, Forthcoming

47 Pages Posted: 28 Aug 2009  

Ellen Engel

University of Chicago Booth School of Business

Rachel M. Hayes

University of Utah - David Eccles School of Business

Xue Wang

Ohio State University - Fisher College of Business

Date Written: July 31, 2009

Abstract

We examine the relation between audit committee compensation and the demand for monitoring of the financial reporting process. We find that total compensation and cash retainers paid to audit committees are positively correlated with audit fees and the impact of the Sarbanes-Oxley Act, our proxies for the demand for monitoring. Our results are robust to the inclusion of audit committee quality, measured as the committee chair financial expertise. Our results suggest a recent willingness by firms to deviate from the historically prevalent one-size-fits-all approach to director pay in response to increased demands on audit committees and differential director expertise.

Keywords: audit committees, board of director compensation, audit fees

JEL Classification: G30, M41, M49

Suggested Citation

Engel, Ellen and Hayes, Rachel M. and Wang, Xue, Audit Committee Compensation and the Demand for Monitoring of the Financial Reporting Process (July 31, 2009). Journal of Accounting and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1463494

Ellen Engel

University of Chicago Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-0966 (Phone)
866-377-52152 (Fax)

Rachel M. Hayes

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Xue Wang (Contact Author)

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-688-1330 (Phone)
614-292-2118 (Fax)

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