Audit Committee Voluntary Disclosures of External Auditor Oversight and SEC Monitoring Intensity

Abstract

I examine whether voluntary disclosures by a firm’s audit committee about their oversight of the external auditor are associated with SEC monitoring intensity during SEC’s annual review process. Drawing on the importance of AC charters, reports and proxy statements, and based on disclosures by audit committees in proxy statements of S&P 1500 firms covering the 2015-2021 proxy seasons, I find that such voluntary disclosures overall are not associated with SEC monitoring intensity. I find some evidence that disclosures of evaluation criteria of the external auditor are negatively associated with some proxies of monitoring intensity. I also find some evidence that this association persists in the cross-section of firms that increase their percentage of non-audit services from the prior year. This study contributes to the growing stream of literature on the consequences of voluntary disclosures by audit committees and helps investors and AC members better understand the determinants of the monitoring decisions made by the SEC during its annual review process.