This study addresses the impact of certain audit committee characteristics identified by the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees (BRC) on the likelihood of financial restatement. We examine 88 restatements of annual results (without allegations of fraud) in the period 1991–1999, together with a matched pairs control group of firms of similar size, exchange listing, industry and auditor type. We find that the independence and activity level (our proxy for audit committee diligence) of the audit committee exhibit a significant and negative association with the occurrence of restatement. We also document a significant negative association between an audit committee that includes at least one member with financial expertise and restatement. To test the robustness of the results we also consider a sample of 44 fraud and no-fraud firms and arrive at largely similar findings. Our results underscore the importance of the BRC's recommendations as a means of strengthening the monitoring and oversight role that the audit committee plays in the financial reporting process.

This study examines the association between audit committee characteristics and audit fees, using data gathered under the recent SEC fee disclosure rules. We hypothesize that audit fees will be positively associated with audit committee independence, financial expertise, and meeting frequency. We examine a sample of 492 nonregulated, Big 5-audited firms that filed proxy statements with the SEC in the period from February 5, 2001 to June 30, 2001. We find that audit committee independence (defined as an audit committee comprised entirely of outside, independent directors) and financial expertise (defined as an audit committee containing at least one member with financial expertise) are significantly, positively associated with audit fees. This is in contrast to the findings of Carcello et al. (2002a), who find that audit committee characteristics are not significant in the presence of board-related variables. Meeting frequency (defined as an audit committee that meets at least four times annually) was not associated with higher audit fees at conventional levels. This evidence is consistent with audit committees taking actions within their span of control to ensure a higher level of audit coverage.

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This study examines the association between audit committee characteristics and the ratio of nonaudit service (NAS) fees to audit fees, using data gathered under the Securities and Exchange Commission's (SEC's) fee disclosure rules. Issues related to NAS fees have been of concern to practitioners, regulators, and academics for a number of years. Prior research suggests that audit committees possessing certain characteristics are important participants in the process of managing the client-auditor relationship. We hypothesize that audit committees that are independent and active financial monitors have incentives to limit NAS fees (relative to audit fees) paid to incumbent auditors, in an effort to enhance auditor independence in either appearance or fact. Our analysis using a sample of 538 firms indicates that audit committees comprised solely of independent directors meeting at least four times annually are significantly and negatively associated with the NAS fee ratio. This evidence is consistent with audit committee members perceiving a high level of NAS fees in a negative light and taking actions to decrease the NAS fee ratio. CondenséLes auteurs examinent le lien entre les caractéristiques du comité de vérification et le rapport entre les honoraires des services autres que la vérification (désignés NAS -non-audit services ) et les honoraires des services de vérification, à l'aide de données recueillies aux États-Unis, sous le régime des règles imposées par la Securities and Exchange Commission (SEC) en matière d'information à fournir sur les honoraires. Depuis bon nombre d'années, les questions relatives aux honoraires des NAS préoccupent les praticiens, les responsables de la réglementation et les chercheurs. La présente étude est motivée par deux décisions * Accepted by Dan Simunic. The authors would like to thank Pamela Roush, Lori Kopp, our discussant at the 2002 AAA Auditing Midyear Conference, and workshop participants at the University of Arkansas and the University of Georgia for helpful comments. We are also grateful to two anonymous reviewers and the associate editor, Dan Simunic, for their helpful suggestions. The second author gratefully acknowledges the financial support of the Ernst and Young Accounting Faculty Research Fellowship and the Dean Witter Foundation.