Insights into the Evolving Responsibilities of the Audit Committee

Abstract

Audit committees (AC) play an important role in overseeing financial reporting systems and boosting investor confidence, with attention on effective AC practices dating back to the 1940s. However, nearly 20 years after SOX, the role of the AC has changed significantly, with many ACs now overseeing a variety of non-traditional risks and balancing an ever-increasing workload. In this study, we seek to understand these shifting expectations in the scope of AC oversight and how ACs manage these evolving responsibilities. We conduct semi-structured interviews with 30 AC members serving U.S. publicly traded companies to address our research question. Following positivist field study methods, we use our theoretical lens to help us understand and interpret our interview data. Our findings should be of interest to academics who study the function and role of audit committees as well as stakeholders and regulators of companies who rely on audit committees for oversight of key risks.

Keywords: audit committee, managing evolving responsibilities

JEL Classification: G34, M14, M41, M42