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The impact of audit committee quality on financial reporting quality and audit fees

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  • Rainsbury, Elizabeth A.
  • Bradbury, Michael
  • Cahan, Steven F.

Abstract

This study examines the association between the quality of audit committees on financial reporting quality and external audit fees in an environment where the formation of audit committees was unregulated. The study uses a sample of 87 New Zealand firms in 2001 when no regulations or listing rules existed for audit committees. The results show no significant association between the quality of an audit committee and the quality of financial reporting. These results are robust to alternative measures of earnings quality. Similarly, the quality of audit committees has little impact on the level of fees paid to external auditors. The results suggest that the benefits of ‘best practice’ audit committees may be less than anticipated by regulators and policymakers.

Suggested Citation

  • Rainsbury, Elizabeth A. & Bradbury, Michael & Cahan, Steven F., 2009. "The impact of audit committee quality on financial reporting quality and audit fees," Journal of Contemporary Accounting and Economics, Elsevier, vol. 5(1), pages 20-33.
    • Handle: RePEc:eee:jocaae:v:5:y:2009:i:1:p:20-33
    DOI: 10.1016/j.jcae.2009.03.002
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