AAA Spark Meeting of Regions

Audit Committee Connectedness and Audit Outcomes

• In Event: Audit Committees Attributes' and Characteristics of the Audit, including pricing

Abstract

The study examines the effect of audit committee connectedness, measured using network centrality from social network theory, on audit outcomes, specifically audit fees, audit quality, and audit timeliness. We find that audit committee connectedness is associated with increased audit fees, reduced audit lag, and higher audit quality. Additional analysis indicates that the results are driven by the overall centrality of the audit committee and not by the centrality of committee chairs, committee financial experts, or members of the committee, and are most pronounced in the post-SOX period. These findings strongly suggest that more connected audit committees demand superior audit quality and timeliness, which ensues into paying higher audit fees for superior auditor efforts.

Authors

• Sharif Islam, Southern Illinois University Carbondale

• William McCumber, Louisiana Tech University

• Nusrat Farah, Southern Illinois University Carbondale

• William W Stammerjohan, Louisiana Tech University