Auditor Independence, Audit Committee Quality and Internal Control Weaknesses

Sorinel Domnișoru and Sorin-Sandu Vînătoru
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Sorinel Domnișoru: University of Craiova, Romania
Sorin-Sandu Vînătoru: University of Craiova, Romania

Annals of the University of Petrosani, Economics, 2008, vol. 8, issue 1, 161-166

Abstract: In this paper we investigate the relation between auditor independence, audit committee quality and the disclosure of internal control weaknesses. We begin with a sample of firms with internal control weaknesses and, based on industry, size, and performance, match these firms to a sample of control firms without internal control weaknesses. Our conditional logit analyses indicate that a relation exists between audit committee quality, auditor independence, and internal control weaknesses. Firms are more likely to be identified with an internal control weakness, if their audit committees have less financial expertise or, more specifically, have less accounting financial expertise and non-accounting financial expertise. They are also more likely to be identified with an internal control weakness, if their auditors are more independent. In addition, firms with recent auditor changes are more likely to have internal control weaknesses

Keywords: internal control weakness; audit committee financial expertise; auditor independence (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:pet:annals:v:8:i:1:y:2008:p:161-166

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