Business, Management and Accounting
4 years ago

Connected audit committees demand better quality, leading to higher audit fees.

SSRN Electronic Journal
Audit Committee Connectedness and Audit Fees
Sharif Islam, William R. McCumber, William W. Stammerjohan, Nusrat Farah

Paper Summary

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Audit committees that are well-connected with other members are linked to higher audit fees. This is because these connected committees prioritize better financial reporting quality and timely information sharing. The overall centrality of the audit committee, rather than specific members, drives this association. These results hold true both before and after the implementation of the Sarbanes-Oxley Act and even after considering the network centrality of the CEO and CFO. In essence, having a well-connected audit committee leads to higher audit fees due to their focus on demanding better audit quality and timely information dissemination.