Overseeing the External Audit Function: Evidence from Audit Committees’ Reported Activities

Brian Bratten; Monika Causholli; Valbona Sulcaj

doi:10.2308/AJPT-2020-106

Overseeing the External Audit Function: Evidence from Audit Committees’ Reported Activities

Brian Bratten, Monika Causholli, Valbona Sulcaj

Accountancy

Research output: Contribution to journal › Article › peer-review

12 Scopus citations

Abstract

Recently, in response to calls for more transparency, many firms have begun reporting the activities undertaken by their audit committees in overseeing the work of the external auditor. We use a composite measure of audit committees’ reported oversight activities for a sample of S&P 1500 firms and examine the extent to which these reported activities are associated with audit quality. We find that when firms’ audit committees report exerting strong oversight, they have higher audit quality as proxied by audit fees, discretionary accruals, the likelihood of meeting or beating earnings benchmarks, and restatements. We also find that the market reacts positively to reports indicating strong oversight, consistent with perceptions of higher audit quality. This study extends prior literature on audit committees by introducing a new comprehensive measure of audit committees’ reported oversight activities and sheds light on how these activities map into audit quality.

Original language	English
Pages (from-to)	1-31
Number of pages	31
Journal	Auditing
Volume	41
Issue number	4
DOIs	https://doi.org/10.2308/AJPT-2020-106
State	Published - Nov 2022

Bibliographical note

Publisher Copyright:
© 2022, American Accounting Association. All rights reserved.

Funding

We thank Ann Vanstraelen (editor), two anonymous reviewers, Urton Anderson, Mark Kohlbeck, Mathijs Van Peteghem, Roy Schmardebeck, Eddie Thomas, David Ziebart, and participants at the 2018 International Symposium for Audit Research (ISAR), the 2018 AAA Annual Meeting, the 2018 AAA Southeast Regional Meeting, the 2018 Temple University Accounting Conference, the 2019 Audit Midyear Meeting, the 2020 FARS Midyear Meeting, the University of Kentucky, and the University of Louisville for helpful comments and suggestions. We gratefully acknowledge financial support from the Gatton College of Business & Economics, the Deloitte Professorship, and the Von Allmen School of Accountancy at the University of Kentucky.

Keywords

audit committees
audit quality
financial reporting

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

Access to Document

10.2308/AJPT-2020-106

Cite this

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Overseeing the External Audit Function: Evidence from Audit Committees’ Reported Activities

Abstract

Bibliographical note

Funding

Keywords

ASJC Scopus subject areas

Access to Document

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