Audit committee effectiveness: Perceptions of public company audit committee members post-SOX

Abstract

Effective audit committees provide numerous public benefits including better financial reporting and reduced corporate fraud. Prior to the passage of the Sarbanes–Oxley Act (SOX), research identified specific features of audit committee effectiveness, many of which were subsequently included in SOX Sections 301 and 407 regulations on audit committees. Using survey methodology, this study examines the extent to which public company audit committee members believe these effectiveness features are operating within their committees today. Eighty public company audit committee members from a variety of industries completed a survey and indicated that overall, features of effective audit committees are present. A number of areas for potential improvement were noted. By soliciting post-SOX information about audit committee effectiveness from a difficult to access subject pool, our study provides researchers, educators, public company management, and public company boards of directors with an updated understanding of the current state of public audit committee effectiveness. Results from this study can inform policy makers as they consider the adequacy of current regulations for audit committees.