Insights into the Evolving Responsibilities of the Audit Committee
55 Pages Posted: 28 Nov 2022 Last revised: 4 Jun 2023
Date Written: June 2, 2023
Abstract
Over the past two decades, many audit committees (ACs) have seen their oversight responsibilities evolve to include some of the hottest topics in the board room: enterprise risk management; cybersecurity and data privacy; and environmental, social, and governance reporting. At the same time, other ACs pushed back on their boards and actively avoided these evolving areas due to concerns about insufficient ability to focus on their primary oversight responsibilities related to financial reporting, external and internal auditors, and internal controls. To better understand why some ACs accept these evolving oversight responsibilities while others do not, we interview a diverse set of 29 ACs from publicly traded companies in the U.S. We analyze ACs’ helping behaviors through the theoretical lens of organizational citizenship behavior to identify reasons for the significant variation across companies. In subsequent analysis, we examine strategies that ACs adopt to manage their increased workload. Our findings should be of interest to boards, investors tasked with evaluating AC performance, and regulators involved in rulemaking related to board committee workloads.
Keywords: audit committee, corporate governance, evolving responsibilities, organizational citizenship behavior (OCB), proactive and reactive helping
JEL Classification: G34, M14, M41, M42
Suggested Citation: Suggested Citation