The effects of audit committee activity and independence on corporate fraud

Abstract

Examines whether two key audit committee characteristics combined, activity and independence, reduce likely fraud or aggressive financial statement actions. Utilizes evidence on potential of Blue Ribbon Committee (1999) recommendations regarding composition of audit committees, and further involves a sample of 156 firms — 78 subject to SEC Accounting and Auditing Enforcement Releases and 78 similar sized non‐sanctioned firms. Closes by stating future research may be required regarding young and mature firms ‐ that could affect monitoring.