SYNOPSIS: Because authoritative statements on corporate governance (e.g., the Sarbanes-Oxley Act of 2002) are silent about how frequently audit committees should meet, corporate audit committees have considerable discretion in scheduling meetings. Although prior research shows the frequency of audit committee meetings is an important indicator of the effectiveness of the audit committee, we know very little about the underlying determinants of meeting frequency. In this study, we examine the determinants of the frequency of audit committee meetings in a voluntary governance system, New Zealand. We find that multiple directorships, audit committee independence, and an independent chair of the audit committee are negatively associated with meeting frequency. Other variables negatively associated with meeting frequency include a Big 4 auditor, growth opportunities, and regulated industry. Audit committee meeting frequency is positively associated with the size of the audit committee and the level of institutional and managerial ownership. We also find that financial expertise and board independence are positively associated with meeting frequency when the risk of financial misreporting is higher.

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This study examines the association between multiple-directorships and tenure of independent audit committee members and financial misstatements in the preand post-Sarbanes-Oxley (SOX) reform environment. Regulatory reforms following the accounting scandals at Enron and WorldCom substantially expanded the responsibilities and scrutiny of the audit committee and, consequently, amplify the reputational and litigation risks facing the directors serving on the committee. Our results show a significant positive association between financial misstatements and multiple-directorships in the post-SOX environment. This finding suggests that independent audit committee members serving on multiple boards may be stretched too thinly to effectively perform their monitoring responsibilities. We also find a significant positive association between the tenure of independent audit committee members and financial misstatements in the post-SOX environment, suggesting that directors with longer tenure may not exercise independent judgment. These observations support calls for limits on multiple-directorships and director tenure, and add to our understanding of how independent directors' characteristics affect the effectiveness of the audit committee.

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