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An increasing number of earnings restatements along with many allegations of financial statement fraud committed by high profile companies (e.g. Enron, WorldCom, Global Crossing, Adelphia) has eroded the public confidence in corporate governance, the financial reporting process, and audit functions. The Sarbanes‐Oxley Act of 2002 was an attempt to regain confidence and trust in corporate America and the accounting profession. The Act addresses corporate scandals and the perceived crisis in the auditing profession. Some of its provisions relate to the audit committee oversight function over corporate governance, financial reporting, internal control structure, internal audit functions, and external audit services. This study examines three types of audit committee disclosures: the annual report of the audit committee; reporting of the audit committee charter in the proxy statement at least once every three years; and disclosure in the proxy statement of whether the audit committee had fulfilled its responsibilities as specified in the charter. This study conducts a content analysis on audit committee disclosures of Fortune 100 companies.

Establishing an audit committee presumably strengthens the external auditor’s independence. Several studies have examined how audit committees affect the selection of the company’s external auditor, negotiate audit fees and enhance the auditor’s independence. But what of the independence of the audit committee members themselves? Do audit committee members exhibit biases when they select their company’s auditors? The relationship between the entity’s external auditor and the audit committee member’s affiliated company’s auditors has not been examined. For example, are audit committee members prone to select or remain with audit firms with which they have developed a formal relationship within their own company? This study of 247 New York Stock Exchange firms finds significant relationships (at the 0.05 level of significance) between CPA firms selected by audit committees and by the CPA firm which audits the audit committee member’s own organization. Results indicate that audit committee members exhibit conscious or unconscious biases in their selection or retention of their companies’ auditors.

The purpose of this paper is to examine the characteristics and qualifications of audit committee financial experts. Specifically, the paper examines if the majority of the financial experts possess accounting or general management experience.

The authors collected the data through survey and use cross tabulation (univariate) and logistic regression to analyze the data.

The results show that accounting certification and audit committee experience are valued positively by the Board of Directors when designating an audit committee member as a financial expert. Prior experience as a CEO results in a lower probability of being designated as a financial expert.

Non‐response bias may be a factor which should be considered. There are other factors such as stock exchange affiliation of the company that have not been included due to the anonymous nature of the survey.

It provides useful information and benchmark to the Board of Directors with respect to the characteristics of designated audit committee financial experts.

This is the first paper to examine the characteristics of audit committee financial experts through survey. The paper presents a richer array of factors compared to what is available in proxy statements. Audit committees, financial statement users, policy makers, and researchers will find the results interesting and useful.

Audit committees have a relatively long history dating back to the nineteenth century. It is only in recent years that their use has been popularized again in the private sector. Fundamentally, it is often argued that audit committees exist to mediate between executive directors and auditors while providing an overall enhancement of corporate accountability. One of the recent effects of the drive to incorporate business methods into other sectors has been the establishment of audit committees. It does, however, pose the question of the role of these committees which are operating in a different context from their origins. Looks at the operation of audit committees in a defined sector, namely universities. Using a postal questionnaire, all directors of finance (or equivalent) in UK universities were surveyed to establish whether or not audit committees existed in their institutions, the purpose being to determine the extent of audit committees, the reasons why they have or have not been established, and the advantages and problems encountered with them. One interesting result that arose with implications for accountability and governance was that in universities the stewardship and strategic policy‐making functions are generally separate and that audit committees report only on the former. This is in contrast to the situation in the private sector where both functions are generally combined in the activities of the board of directors. Because there is considerable overlap between the membership of audit committees and the boards of directors, it could be argued that this provides the potential for a greater degree of accountability and governance than currently exists in universities.

The impact of recent corporate scandals has been serious and far‐reaching. The popular news coverage has been unequalled by any other business issue. The result is that the investment community has lost its trust in corporate governance and financial reporting systems that less than two years ago were the envy of the world. Shareholders are insisting on changes that include enhancements to corporate governance, adherence to ethical standards and strict accountability. In response, the government, the investment community and the public in general have focused greater scrutiny on the corporate financial reporting function.

Auditors are urged to promote communication with audit committees as well as with the entire board. Contacts with the entire board are most appropriate, given the rise of issues of corporate governance. It is not yet understood how effective audit committees have actually been, although the committees’ objectives are commendable. It is likely that any significant shortcomings will be redressed by synthesizing the work of the committees and of the board. The responsibilities of audit committees will be broadened, especially with respect to new practice areas, some of which involve proactive audit approaches. The qualifications for audit committee membership require upgrading; a need exists for practical accommodation between independence, on the one hand, and the tight market for qualified committee members, on the other.

Gives examples of a number of organizations, committees, and commissions which have promoted both internal auditing and audit committees during the past two decades. Explores the need for a close working relationship between the internal auditor and the audit committee. Examines: (1) the evolution of both internal auditing and audit committees; (2) the Treadway Commission recommendations regarding the importance and role of audit committees and internal auditors; (3) ways in which internal auditors can work with audit committees; and (4) benefits gained from this relationship. Shows how, recently, internal auditors have been transformed from a financial enforcer to a respected member of the management decision‐making process, and audit committees have also assumed more oversight responsibilities in the areas of financial reporting and internal control. Thus, a close and effective working relationship between the audit committee and the internal auditor will be beneficial not only to the company which they serve but also to society as a whole.

Outlines the nature of audit committees in UK companies including the interaction between the audit committee and the internal audit function. Suggests that audit committees are not a panacea for deficiencies in corporate governance.

The role of audit committees in ensuring the quality of corporate financial reporting has come under considerable scrutiny due to recent high‐profile “earnings management” cases and the collapse of Enron. The purpose of this paper is to examine the association between the characteristics of audit committees (size, independence, financial expertise, activity, and stock ownership) and earnings restatement – a direct measure of earnings management.

Univariate correlations and multivariate statistical analyses are performed. In particular, a multivariate logistic regression model is used.

Evidence suggests a negative association between the size of audit committees and the occurrence of earnings restatement. The remaining four audit committee characteristics are not found to have a significant impact on the quality of reported earnings.

This study focuses on the fiscal year 2000 only. As data become available for more fiscal years, future studies may re‐examine the issue.

Results of this research provide useful information for the accounting profession, the regulators and corporations on the effective practice of audit committees.

Audit committees have a vital role to play in business, performing a number of important functions. The future role of audit committees is examined and some proposals for their development are described: to review and report to the board; to monitor the management information systems and their adequacy, to review the effectiveness of internal controls; and to ensure compliance with regulations and legislation.