Audit committee composition and effectiveness: a review of post-SOX literature

Abstract

The Sarbanes-Oxley Act (SOX) is enacted to strengthen corporate governance practices by enhancing the power of audit committee. After 2002, audit committee has received increasing emphasis in accounting research. The objective of this study is to review the growing volume of audit committee literature in post-SOX era. While summarizing the post-SOX literature, I also focus on selected pre-SOX studies to compare the domains and findings of pre and post-SOX literature. I classify the area of post-SOX literature into five categories; these are auditing, financial reporting, earnings management, internal control problems and other issues. My analysis suggests that the extant audit committee literature has successfully developed an enormous body of knowledge. In post-SOX era, researchers focus on new issues which are mostly driven by the SOX. My review also finds a predominance of experimental research. As such, there is ample room for future research that can shed light on some conflicting issues with more theoretical and real insights.