Three essays on audit committees and financial reporting quality

This dissertation investigates the relationship between audit committee characteristics and financial reporting quality. The dissertation is organized into three essays that examine this topic. The first two essays examine audit committee characteristics and their association with various measures of financial reporting quality. Essay Three summarizes relevant literature regarding conservatism, a measure of financial reporting quality. In Essay One, I examine whether adding board members with accounting financial expertise to the audit committee is associated with an increase in a firm's accounting conservatism. The results of this study provide evidence that the addition of accounting expertise is positively associated with higher conservatism as measured by the Penman and Zhang (2000) C-Score measure of conservatism, but only for firms with a strong governance structure. For firms with weak governance, the addition of accounting expertise to the audit committee is associated with higher levels of conservatism as measured by the Givoly and Hayn (2000) negative accruals measure of conservatism. However, the addition of accounting financial expertise is not associated with higher levels of conservatism as measured by the Beaver and Ryan (2000) book-to market measure. Sensitivity analysis suggests that the addition of accounting financial expertise is associated with higher conditional conservatism as measured by the Basu (1997) asymmetric loss recognition measure. In Essay Two, I investigate the association between analyst earnings forecast properties and the presence of accounting financial expertise on audit committees. The results indicate that the presence of accounting financial expertise is associated with significantly higher forecast accuracy and significantly lower forecast dispersion. Additionally, I find that the non-accounting financial expertise is significantly associated with higher analyst forecast accuracy and lower forecast dispersion, but nonfinacial expertise is not. Essay Three summarizes relevant literature regarding conservatism, a measure of financial reporting quality. (Published By University of Alabama Libraries