Consequences of Voluntary Audit Committee Adoption by Nonprofit Organizations

• In Event: Nonprofit and Governmental Auditing

Abstract

We examine consequences of voluntary adoption of an audit committee using a sample of entities that disclose voluntary audit committee adoption on Form 990 in the year 2009. Nonprofits that voluntarily adopt an audit committee are more likely to use non-Big 4 specialist auditors. Consistent with one of the roles of audit committees, we find that audit committee adopters are more likely to change auditors following adoption compared to non-adopters. Adoption of an audit committee is not significantly associated with reported administrative expenses. However, adopters report higher fundraising expenses and improved fundraising efficiency, providing evidence that audit committee adoption impacts financial reporting.

Authors

• Randal J Elder, Syracuse University

• Nancy Chun Feng, Suffolk University

• Daniel Gordon Neely, University of Wisconsin-Milwaukee