Audit committee composition and auditor reporting

This study examines the relation between the composition of financially dis tressed firms' audit committees and the likelihood of receiving going-conce rn reports. For firms experiencing financial distress during 1994, we find that the greater the percentage of affiliated directors on the audit commit tee, the lower the probability the auditor will issue a going-concern repor t, These results support regulators' concern about financial-reporting qual ity and the recent calls for more independent audit committees.