Audit committee composition and effectiveness: The role of odd-numbered committees

In this paper, we investigate whether the odd composition of audit committees influences the demand for audit effort. Extant literature posits that the financial reporting quality is higher when audit committees comprise an odd number of directors. The rationale is that the odd composition of committees fosters a voting environment where directors are more inclined to vote informatively and independently, leading to decisions that better align with shareholders' interests. Our findings support this theory, showing that odd audit committees demand greater audit effort. In addition, we find that the odd audit committees are more likely to make decisions that enhance auditor independence by not using auditor-provided tax services and strengthen financial reporting quality by avoiding the delay in the engagement of new auditors. We further find that the association between odd audit committees and the demand for audit effort is not affected by audit committee size and odd audit committees are negatively associated with material weaknesses in internal controls. Our study makes a valuable contribution to the corporate governance literature by documenting that the odd versus even composition of audit committees enhances the effectiveness of audit committee monitoring related to the quality of financial reporting.