The Monitoring Effectiveness of Co-opted Audit Committees

• 成果类型: Article
• 署名作者: Cassell, Cory A.; Myers, Linda A.; Schmardebeck, Roy; Zhou, Jian
• 署名单位: University of Arkansas System; University of Arkansas Fayetteville; University of Tennessee System; University of Tennessee Knoxville; University of Hawaii System
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12429
• 发表日期: 2018
• 页码: 1732-1765
• 关键词: CORPORATE GOVERNANCE; INTERNAL CONTROL; empirical-analysis; equity incentives; earnings; QUALITY; BOARD; association; DIRECTORS; accruals

摘要

We investigate the relation between audit committee co-option and financial reporting quality, where audit committee co-option is measured as the proportion of audit committee members who joined the board after the appointment of the current Chief Executive Officer (CEO). Because CEOs are often actively involved in the director nomination and selection process, we expect that higher levels of audit committee co-option will be associated with less effective monitoring, as evidenced by more financial statement misstatements and greater absolute discretionary accruals. Consistent with our expectations, we find a positive relation between audit committee co-option and misstatements as well as between audit committee co-option and absolute discretionary accruals. Our findings should be of interest to regulators, investors, and other stakeholders because we provide new evidence about how potential CEO influence on director nominations and audit committee appointments impacts the effectiveness of monitoring by the audit committee.