Insights from an Analysis of Audit Committee Governance Practices at U.S. Registered Investment Companies and Public Operating Companies

67 Pages Posted: 25 Nov 2019

See all articles by J. Gregory Jenkins

J. Gregory Jenkins

Auburn University - School of Accountancy

Jonathan Pyzoha

Miami University - Department of Accountancy

Mark H. Taylor

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy

Date Written: October 2019

Abstract

Guided by agency theory and institutional theory, we investigate the influence of the unique aspects of investment companies (ICs) on audit committee (AC) governance and compare AC IC and operating company (OC) governance practices. We use a dual-method, three-stage research approach: (1) surveys of 107 IC AC members, (2) interviews of ten AC and ten management members at ICs, and (3) interviews of ten OC AC members and follow-up interviews of the ten IC AC members. Consistent with agency theory, we find IC ACs are substantively engaged in overseeing AC operations quality (AC composition and diligence) and other critical governance areas (auditor hiring/retention, audit process, agenda setting, and critical risks), whereas management is not. In contrast, our findings for OC ACs reveal evidence of both ceremonial oversight (auditor retention/hiring and agenda setting) and substantive oversight (audit process and critical risks). Our study’s findings have important implications for regulators and practitioners.

Keywords: Investment company, mutual fund, audit committee, corporate governance

Suggested Citation

Jenkins, J. Gregory and Pyzoha, Jonathan and Taylor, Mark H., Insights from an Analysis of Audit Committee Governance Practices at U.S. Registered Investment Companies and Public Operating Companies (October 2019). Available at SSRN: https://ssrn.com/abstract=3486312 or http://dx.doi.org/10.2139/ssrn.3486312

J. Gregory Jenkins

Auburn University - School of Accountancy ( email )

415 West Magnolia Avenue
301 Lowder Business Building
Auburn, AL 36849
United States

Jonathan Pyzoha (Contact Author)

Miami University - Department of Accountancy ( email )

Miami University
800 E. High Street
Oxford, OH 45056
United States
513-529-3913 (Phone)

Mark H. Taylor

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy ( email )

4202 E. Fowler Avenue
Tampa, FL 33620
United States
(813) 974-6516 (Phone)

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