Effect of audit committee deliberations on financial reporting quality: Evidence from audit committee minutes

Abstract

My dissertation examines whether audit committee deliberations are associated with financial reporting quality. This is important because audit committees are responsible for overseeing the integrity of the firm's internal controls over financial reporting, accounting and reporting practices, financial statements, and external auditors. However, little is known about the nature of their deliberations, because this information is not available for publicly-traded companies. In contrast, this information is available for many universities, which are operating more like for-profit entities as the competition for students increases and financial resources become more scarce. Using a unique sample of minutes from universities' audit committee meetings, I first identify the topics of deliberation contained within these minutes. I then examine which specific audit committee deliberations are associated with the likelihood of severe deficiencies in internal control, my proxy for financial reporting quality. I find that internal audit and financial statements are the two most frequently discussed audit committee topics. However, the discussions that have the strongest negative association with the likelihood of internal control deficiencies are those that address internal controls, audit committee expertise, and the audit committee charter. These results provide useful information regarding audit committee deliberations, information that is unavailable for publicly-traded companies, and aid our understanding of how audit committees influence the quality of firms' financial reporting outcomes.