Audit Committee Effectiveness and Financial Reporting Quality: Implications for Auditor Independence

Authors

  • Ganesh Krishnamoorthy,

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      All authors contributed equally. Ganesh Krishnamoorthy is an associate professor in the Accounting Group, College of Business Administration at Northeastern University. Arnie Wright is a professor and Jeffrey Cohen an associate professor, both in the Department of Accounting, Carroll School of Management at Boston College. The authors wish to acknowledge the helpful suggestions made by Lynn Barkess, Gary Monroe, Roger Simnett and Linda Thorne.

  • Arnie Wright,

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      All authors contributed equally. Ganesh Krishnamoorthy is an associate professor in the Accounting Group, College of Business Administration at Northeastern University. Arnie Wright is a professor and Jeffrey Cohen an associate professor, both in the Department of Accounting, Carroll School of Management at Boston College. The authors wish to acknowledge the helpful suggestions made by Lynn Barkess, Gary Monroe, Roger Simnett and Linda Thorne.

  • Jeffrey Cohen

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      All authors contributed equally. Ganesh Krishnamoorthy is an associate professor in the Accounting Group, College of Business Administration at Northeastern University. Arnie Wright is a professor and Jeffrey Cohen an associate professor, both in the Department of Accounting, Carroll School of Management at Boston College. The authors wish to acknowledge the helpful suggestions made by Lynn Barkess, Gary Monroe, Roger Simnett and Linda Thorne.


Abstract

Auditors participating in a survey identified oversight of financial reporting and the external audit process, and ensuring quality internal controls, as the most important functions of effective audit committees. Financial literacy or expertise, independence, and a strong commitment to perform the job effectively were noted as important attributes. The results also suggest that although audit committees have enough power to confront management on contentious issues, they are not very effective in helping to resolve financial reporting disputes. Management was identified as a key influence in affecting the nature, extent, and quality of communication between the auditor and the audit committee. Most auditors believe that it is not important for each member of the audit committee to be an expert, but it is important that they are financially literate.

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