[This study empirically tests the prediction that the inclusion of larger proportions of outside members on the board of directors significantly reduces the likelihood of financial statement fraud. Results from logit regression analysis of 75 fraud and 75 no-fraud firms indicate that no-fraud firms have boards with significantly higher percentages of outside members than fraud firms; however, the presence of an audit committee does not significantly affect the likelihood of financial statement fraud. Additionally, as outside director ownership in the firm and outside director tenure on the board increase, and as the number of outside directorships in other firms held by outside directors decreases, the likelihood of financial statement fraud decreases.]

Examines the prediction that the inclusion of larger proportions of outside members on the board of directors significantly reduces the likelihood of financial statement fraud. Fraud firm selection; Differences in outside directors; Grey and independent directors; Consideration of audit committees; Other board characteristics.

This study empirically examines the relation between certain board of director characteristics and the extent that audit committee composition voluntarily exceeds minimum mandated levels and includes outside directors with financial reporting and audit committee knowledge and experience. This study focuses on board characteristics because the board directly controls audit committee membership. Such staffing decisions can directly affect the ability of the audit committee to monitor management's financial reporting process on behalf of the board. Results suggest that Canadian firms that voluntarily include more outside directors on the audit committee than the mandated minimum have larger boards with more outsiders serving on those boards and are more likely to segregate the board chairperson position from the CEO/president positions. Additionally, firms that voluntarily create audit committees composed of outsider members with a breadth of relevant financial reporting and audit committee knowledge and experience have boards that are larger, have more outside members, and are less likely to be chaired by the CEO/president. Implications of these findings for auditors, institutional investors, regulators, and other interested parties are discussed.

Relatively few studies have examined the audit committee oversight process--the activities that link audit committee inputs and financial reporting outcomes. To study this process, we conducted extensive interviews with 42 U.S. public company audit committee members. We explore six audit committee process areas, offer insights into the state of audit committee processes in the post-Sarbanes-Oxley Act (SOX) environment, and consider our results in light of agency theory and institutional theory; We find that many audit committee members strive to provide effective monitoring of financial reporting and seek to avoid serving on ceremonial audit committees, but within each of the six process areas we find evidence of both substantive monitoring and ceremonial action, such that neither agency theory nor institutional theory fully explains our results. We also find that many responses vary with personal and company characteristics, with particularly notable differences related to audit committee members' accounting expertise and time of appointment to the audit committee (pre-SOX versus post-SOX). We discuss implications and directions for future research and theory development.

ABSTRACT Approaches to risk governance are not homogeneous across organizations. Some organizations invest heavily in building formal and strategically focused enterprise-wide risk governance processes whereas others exhibit reduced formality and focus, allowing risk governance to be less structured. We argue that risk governance may best be described as a service dependent upon a network (or ecosystem) of participants who include users of risk information and providers who design and implement risk governance processes. Using a survey sample of 2,380 observations from 2011 to 2016, we find that external calls for enhanced risk governance are positively associated with risk governance processes having greater formality and strategic focus. We find this relationship is partially mediated by internal demands for enhanced risk governance. Further, we find that the positive association between internal demands and enhanced risk governance is reduced by resource constraints and that a risk-seeking attitude is negatively associated with enhanced risk governance. Data Availability: Contact the authors. JEL Classifications: G30; M10; M14; M40.