Time to Revisit Audit Committee Activity: Evidence from Audit Adjustments

Abstract

ABSTRACT This study examines the impact of audit committee activity on audit adjustments. Using unique Korean data on audit adjustments—the earnings discrepancy between pre-audit earnings prepared by management and audited earnings, we find that frequent audit committee meetings decrease the audit adjustments made by external auditors. However, the effectiveness of audit committee activities declines as the number of meetings increases. Additionally, the findings are more pronounced for firms appointing audit committee chairs with accounting financial expertise. Overall, our study highlights audit committee effectiveness critically depends on its activity and the role of the chair.