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Are fully independent audit committees really necessary?


  • Bronson, Scott N.
  • Carcello, Joseph V.
  • Hollingsworth, Carl W.
  • Neal, Terry L.


Accounting scandals and concerns about the quality of financial statements have led to many calls for improved audit committee effectiveness. Prior research indicates that audit committee independence is positively related to effective oversight of the financial reporting process. Unfortunately, prior research has not provided an answer as to how much independence on the audit committee is enough. This is an important unanswered question because while Section 301 of the Sarbanes-Oxley Act of 2002 (SOX) currently requires all listed companies to maintain an audit committee that is 100% independent there has been much debate regarding easing the SOX requirements for smaller and foreign companies. In this paper we examine whether the regulatory requirements of a completely independent audit committee are necessary to obtain the monitoring benefits related to audit committee independence that have been documented in prior literature. Our results suggest that the benefits of audit committee independence are consistently achieved only when the audit committee is completely independent. These results provide support for the SOX requirement of 100% independent audit committees.

Suggested Citation

  • Bronson, Scott N. & Carcello, Joseph V. & Hollingsworth, Carl W. & Neal, Terry L., 2009. "Are fully independent audit committees really necessary?," Journal of Accounting and Public Policy, Elsevier, vol. 28(4), pages 265-280, July.
  • Handle: RePEc:eee:jappol:v:28:y:2009:i:4:p:265-280

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    Cited by:

    1. Stefanelli, Valeria & Matteo, Cotugno, 2010. "An Empirical Analysis on Board Monitoring Role and Loan Portfolio Quality Measurement in Banks," MPRA Paper 29766, University Library of Munich, Germany.
    2. Niamh M. Brennan & Collette E. Kirwan, 2015. "Audit committees: practices, practitioners and praxis of governance," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 28(4), pages 466-493, May.
    3. Nandini Chandar & Hsihui Chang & Xiaochuan Zheng, 2012. "Does overlapping membership on audit and compensation committees improve a firm's financial reporting quality?," Review of Accounting and Finance, Emerald Group Publishing, vol. 11(2), pages 141-165, May.
    4. repec:eee:reacre:v:27:y:2015:i:2:p:129-137 is not listed on IDEAS
    5. repec:eee:jocaae:v:13:y:2017:i:2:p:108-118 is not listed on IDEAS
    6. Mahfuja Malik, 2014. "Audit committee composition and effectiveness: a review of post-SOX literature," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 25(2), pages 81-117, October.
    7. repec:spr:ecogov:v:18:y:2017:i:2:d:10.1007_s10101-017-0191-y is not listed on IDEAS
    8. Ahsan Habib & Md. Borhan Uddin Bhuiyan, 2016. "Overlapping Membership on Audit and Compensation Committees and Financial Reporting Quality," Australian Accounting Review, CPA Australia, vol. 26(1), pages 76-90, March.
    9. Jin, Justin Yiqiang & Kanagaretnam, Kiridaran & Lobo, Gerald J., 2013. "Unintended consequences of the increased asset threshold for FDICIA internal controls: Evidence from U.S. private banks," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4879-4892.


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