How U.S. audit committees oversee internal control over financial reporting
Abstract
On the basis of a survey of U.S. public company audit committee members, we provide detailed insights into the process underlying audit committee oversight of internal control over financial reporting (ICFR), and we explore cross-sectional variations in audit committee ICFR oversight. We find that audit committees spend the most time in the monitoring activities and control environment areas and the least time in the information and communication and control activities (related to revenue) areas. Further, our exploratory regression analysis reveals that audit committee member age and internal audit experience, company size and regulated industry are positively associated with the extent of overall audit committee ICFR oversight, whereas audit committee member certified public accountant (CPA) certification is negatively related to ICFR oversight. Finally, we provide many specific examples of ICFR oversight process elements that appear to be more substantive, extensive and proactive versus more ceremonial, limited and reactive.