Audit Committee Composition and Effectiveness: A Review of Post-SOX Literature

The Sarbanes-Oxley Act (SOX) was enacted to strengthen corporate governance practices in the United States; since SOX enactment, the audit committee has received increasing emphasis in accounting research. The objective of this study is to review and synthesize the growing volume of audit committee literature in the post-SOX era. While summarizing the post-SOX literature, this study also focuses on selected pre-SOX studies to compare the research issues and findings of pre- and post-SOX literature and to show how governance reforms shape the literature’s domain. The extant audit committee literature reflects an enormous body of knowledge. Both the pre- and post-SOX literature establishes the notion that independent and expert audit committees enhance the effectiveness of audit committee monitoring processes and improve the quality of financial reporting and auditing. These findings supplement the scholarly support for SOX requirements. In the post-SOX era, researchers have focused on issues driven by SOX. However, other issues that are not addressed in SOX have also emerged, including audit committee compensation and committee members ’ social ties with the chief executive officer and supervisory or other expertize of the audit committee members. While the literature contains predominantly experimental research, there is ample room for future research that ca