Consequences Of Voluntary Disclosures In The Audit Committee Report

In recent years a variety of stakeholders request more disclosures of audit committees’activities. As a response, audit committees in many large companies have voluntarily enhanced the depth and scope of their disclosures in the proxy statements. However, controversy arises surrounding whether more disclosures of audit committees’ activities are beneficial to investors. In 2015 the SEC started to seek comments on this issue. In this study I find that larger companies with diligent, longer-tenure, younger and more diversified audit committee members in companies with longer auditor tenure and higher total auditor fees are likely to provide more voluntary disclosures of audit committees’ activities. I also find that audit committee voluntary disclosures are useful to shareholders when they vote on audit committee director elections. However, the significance and directions of the usefulness vary with the content of the disclosures. Moreover, I provide moderate evidence that shareholders are less likely to vote against auditor ratification when the audit committee provides an explanation for a change in fees paid to the independent auditor. Overall, this study provides implications for policy makers such as the SEC as they are deliberating on the revisions of audit committee reporting requirements.