The Effect of Audit Committee Chair and Audit Committee Characteristics on Auditor Dismissal in a Going-Concern Context

• In Event: Audit and AIS

Abstract

This study examines the extent to which the characteristics of the audit committee chair affect auditor dismissal after the first time receipt of a going-concern opinion during the period 2008-2011. I find that audit committees with more members, longer member tenure and greater governance experience are less likely to dismiss their auditors following a going-concern opinion. I also find that the audit committee chair’s financial, audit, legal, and governance expertise are all negatively associated with auditor dismissal. However, only the Chair’s audit and governance expertise are differentially significant in the going-concern context. Most importantly, I provide evidence that the characteristics of the audit committee chair, specifically audit expertise, have a significant incremental effect on auditor dismissal beyond those of the audit committee. Taken together, this study provides evidence supporting the SEC’s assertion that the characteristics of the audit committee chair play an important role in the audit committee.

Author

• Assma M Sawani, University of Colorado-Colorado Springs