Business, Management and Accounting
4 years ago

Audit committees with more affiliated directors less likely to report financial distress.

SSRN Electronic Journal
Audit Committee Composition and Auditor Reporting
Joseph V. Carcello, Terry L. Neal

Paper Summary

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The composition of a financially distressed firm's audit committee affects the likelihood of receiving a going-concern report. In 1994, firms with more affiliated directors on the audit committee were less likely to get a going-concern report from auditors. This shows that having more independent audit committees can improve financial reporting quality.