Auditors' Communications with Audit Committees: The Influence of the Audit Committee's Oversight Approach

What is it about?

Auditors are required to communicate to the audit committee (AC) their views on the quality of management's accounting practices, but they have discretion over the level of detail in their communications. Despite policymakers' interest in auditors' communications as an audit quality indicator, little is known about the factors auditors consider when deciding what to communicate. In this paper, we investigate the influence of the AC's oversight approach on the content of auditors' communications to the AC about significant accounting issues that were resolved with management. Results from an experiment with experienced auditors and findings from supplemental interviews with audit partners reveal that auditors do not provide the same boilerplate communications to all ACs - they tailor their communications to the AC's oversight approach, the AC's industry and accounting knowledge, the AC chair's preferred communication style, and their prior interactions with the AC, including the questions the AC asks.

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