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One important role of audit committees is to protect external auditors from dismissal following the issuance of an unfavorable report. We examine auditor dismissals following new going-concern reports that Big 6 firms issued between 1988 and 1999. Our findings suggest that audit committees with greater independence, greater governance expertise, and lower stockholdings are more effective in shielding auditors from dismissal after the issuance of new going-concern reports. In addition, we find that the relation between audit committee independence and auditor protection from dismissal has grown stronger over time. Finally, independent audit committee members experience a significant increase in turnover rate after auditor dismissals. These findings, coupled with those from Carcello and Neal (2000), suggest that when affiliated directors dominate the audit committee, management often can (1) pressure its auditor to issue an unmodified report despite going-concern issues, and (2) dismiss its auditor if the auditor refuses to issue an unmodified report.

This study examines the relation between the composition of financially distressed firms' audit committees and the likelihood of receiving going-concern reports. For firms experiencing financial distress during 1994, we find that the greater the percentage of affiliated directors on the audit committee, the lower the probability the auditor will issue a going-concern report. These results support regulators' concern about financial-reporting quality and the recent calls for more independent audit committees.

This paper examines the relations between three board characteristics (independence, diligence, and expertise) and Big 6 audit fees for Fortune 1000 companies. To protect its reputation capital, avoid legal liability, and promote shareholder interests, a more independent, diligent, and expert board may demand differentially higher audit quality (greater assurance, which requires more audit work) than the Big 6 audit firms normally provide. The audit fee increases as the auditor's additional costs are passed on to the client, such that we expect positive relations between audit fees and the board characteristics examined.We find significant positive relations between audit fees and board independence, diligence, and expertise. The results persist when similar measures of audit committee "quality" are included in the model. The results add to the growing body of literature documenting relations between corporate governance mechanisms and various facets of the financial reporting and audit processes, as well as to our understanding of the determinants of audit fees. CondenséLa qualité de la surveillance exercée par les conseils d'administration retient de plus en plus l'attention depuis quelques années. Les administrateurs sont astreints à des normes de performance plus élevées, et nombreux sont les groupes qui réclament que l'on insiste davantage sur l'indépendance, la vigilance et les compétences des membres des conseils d'administration d'entreprises (par exemple, NACD, 1996). Les chercheurs précédents ont fait état de plusieurs des répercussions de la « qualité supérieure » des conseils d'administration, notamment la diminution des cas de fraude dans les états financiers (Beasley, 1996) et de la fréquence des situations où la SEC doit prendre des mesures coercitives pour contrer la manipulation des bénéfices (Dechow, Sloan et Sweeney, 1996).