Disclosures in audit committee charters and reports

In response to recent criticisms of audit committee performance, new SEC and stock exchange rules require companies to prepare an audit committee charter and to publish the charter in their proxy statement at least once every three years. Audit committees also must disclose how they discharged their responsibilities during the year. This paper studies the disclosures in audit committee charters and reports by examining a random sample of 150 proxy statements filed in Spring 2001. The primary purposes of this analysis are to understand audit committee activities and to identify possible areas for further audit committee reform. It was found that what audit committees say they are doing in their reports differs from what their charters say the committee should be doing. Results of the study indicate either more active audit committees in such companies, or a greater commitment to audit committee disclosure in such companies.