The Changing Role and Responsibilities of Audit Committees in the United States

The Changing Role and Responsibilities of Audit Committees in the United States

Date: August 2010
Creator: Teed, Dan Graham
Description: The corporate form that developed in the early 20th century created enormous pressure for corporate governance mechanisms to curb the power of corporate managers. Berle and Means, legal pluralists, warned about concentrating economic power in the hands of a small but powerful class of professional managers. They claimed this "new form of absolutism" required governmental oversight and viewed boards of directors as part of management, rather than monitors for shareholders. The Securities and Exchange Commission (SEC) proposed that corporations establish a special board committee, made up of "nonofficer members" in response to the McKesson & Robbins scandal of the late 1930s. My dissertation examines the evolution of the U.S. corporate audit committee through three specific time periods: (1) 1920-1954; (2) 1955-1986; and (3) 1987 to the passage of the Sarbanes-Oxley Act of 2002. My purpose is to determine if evolution of the audit committee throughout these periods has been a reform continually couched in symbolism or whether the audit committee concept has evolved into real reform, allowing proper corporate governance and mitigation of unchecked corporate power. My analysis is a traditional empirical analysis, relying on both primary and secondary sources to develop a coherent ordering of facts. I use narrative ...
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The Association Between the Establishment of Audit Committees Composed of Outside Directors and a Change in the Objectivity of the Management Results-Reporting Function: an Empirical Investigation Into Income Smoothing Patterns

The Association Between the Establishment of Audit Committees Composed of Outside Directors and a Change in the Objectivity of the Management Results-Reporting Function: an Empirical Investigation Into Income Smoothing Patterns

Date: December 1985
Creator: Roubi, Raafat Ramadan
Description: The purpose of this research was to empirically examine the effect of the establishment of outside audit committees on the objectivity of the management results-reporting practices of those companies that established such committees in response to the New York Stock Exchange mandate effective June 30, 1978. Management income smoothing behavior is taken as a measurable surrogate for the objectivity of the management results-reporting practices. This research involved the testing of one research problem. The research question asks, "Will the establishment of outside audit committees by companies that had no such committees prior to the New York Stock Exchange mandate effective June 30, 1978, be associated with a decrease in the degree of smoothing in the net income series for the period after that date relative to the degree of smoothing prior to that date?" The answer to this question required the selection of an experimental and a control group. Each group was composed of fifty New York Stock Exchange listed firms. Linear and semi-log regression models were used to measure each firm's degree of income smoothing (defined as reducing the variability of a net income series about its trend line). The change in mean square errors of the experimental and ...
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