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Voluntary formation of audit committees by large municipal governments

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  • Fitzgerald, Brian C.
  • Giroux, Gary A.

Abstract

The Sarbanes–Oxley Act of 2002 requires that publicly-traded U.S. corporations have an audit committee in their internal control structure. In contrast to publicly-traded commercial firms, municipal governments are not required to form audit committees. Given that regulators believe it is a crucial aspect of internal control, we examine the extent to which city governments feature audit committees in the internal control structure. Based on a survey of financial managers from cities with populations greater than 100,000, we find that approximately 58% of the municipalities have such committees. Results indicate that larger and more financially viable cities are more likely to have audit committees. However, the form of municipal government and the quality of the local government’s financial reporting and audit processes are not significant determinants of the presence of an audit committee.

Suggested Citation

  • Fitzgerald, Brian C. & Giroux, Gary A., 2014. "Voluntary formation of audit committees by large municipal governments," Research in Accounting Regulation, Elsevier, vol. 26(1), pages 67-74.
    • Handle: RePEc:eee:reacre:v:26:y:2014:i:1:p:67-74
    DOI: 10.1016/j.racreg.2014.02.006
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    References listed on IDEAS

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    1. Giroux, Gary & McLelland, Andrew J., 2003. "Governance structures and accounting at large municipalities," Journal of Accounting and Public Policy, Elsevier, vol. 22(3), pages 203-230.
    2. Giroux, Gary & Cassell, Cory, 2011. "Changing audit risk characteristics in the public client market," Research in Accounting Regulation, Elsevier, vol. 23(2), pages 177-183.
    3. Cory A. Cassell & Gary Giroux & Linda A. Myers & Thomas C. Omer, 2013. "The Emergence of Second-Tier Auditors in the US: Evidence from Investor Perceptions of Financial Reporting Credibility," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 40(3-4), pages 350-372, April.
    4. Evans, John III & Patton, James M., 1983. "An economic analysis of participation in the municipal finance officers association certificate of conformance program," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 151-175, April.
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    6. Rupley, Kathleen & Almer, Elizabeth & Philbrick, Donna, 2011. "Audit committee effectiveness: Perceptions of public company audit committee members post-SOX," Research in Accounting Regulation, Elsevier, vol. 23(2), pages 138-144.
    7. Dwyer, Peggy D. & Wilson, Earl R., 1989. "An empirical investigation of factors affecting the timeliness of reporting by municipalities," Journal of Accounting and Public Policy, Elsevier, vol. 8(1), pages 29-55.
    8. Giroux, Gary, 1989. "Political interests and governmental accounting disclosure," Journal of Accounting and Public Policy, Elsevier, vol. 8(3), pages 199-217.
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    Cited by:

    1. Beck, Amanda W. & Stone, Mary S., 2017. "Why municipalities fail: Implications for uncertainty disclosures," Research in Accounting Regulation, Elsevier, vol. 29(1), pages 1-9.
    2. repec:cuf:journl:y:2017:v:18:i:1:moreno-enguix is not listed on IDEAS
    3. Maria del Rocio Moreno-Enguix & Ester Gras-Gil & Joaquin Hernandez-Fernandez, 2017. "An Explanation of Management of Local Governments in Spain Based on the Structure of the Internal Control System," Annals of Economics and Finance, Society for AEF, vol. 18(2), pages 393-410, November.

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