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Gender differences and audit
committee diligence

366

Department of Accounting, Earl G. Graves School of Business and Management,
Morgan State University, Baltimore, Maryland, USA

Sheela Thiruvadi

Abstract
Purpose – The purpose of this paper is to examine the association between the presence of females
on the audit committee and the number of audit committee meetings.
Design/methodology/approach – This paper uses a multivariate regression model to examine the
association between gender on the audit committee and the number of audit committee meetings
used as a proxy for audit committee diligence. The paper uses a sample of 254 firms from the S&P
SmallCap600, with a December 31, 2003 fiscal year-end.
Findings – The author finds consistent evidence to show that audit committees with at least one
female director were likely to meet more often than all-male audit committees.
Research limitations/implications – Future research suggests that it may be fruitful to examine
the effects of gender on other aspects of audit committee and board activities and the interaction between
audit committees, management, and the external auditor. Furthermore, the results of the paper have
strong implications for regulators and policy makers, since the presence of a female director on the audit
committee may bring many positive outcomes, thereby leading to better corporate governance practices.
Hence, the appointment of more females on the audit committee should be strongly emphasized.
Originality/value – This research paper contributes to the contemporary literature regarding the
increased awareness of good outcomes associated with having women on the audit committee in various
ways. First, this research encourages the appointment of more females on the audit committee. Second,
increased diligence of the audit committee leads to enhanced corporate governance practices. Third,
the presence of females on the audit committee could lead to good corporate decision making. Fourth, the
presence of a female on the audit committee could lead to increased confidence of the public. Fifth, this
research also serves as an influencing power to encourage equal opportunities for both men and women.
Keywords Audit committee, Female, Meetings, Audit committee diligence, Corporate governance,
Auditing, Women directors
Paper type Research paper

1. Introduction
The Sarbanes Oxley Act (SOX) of 2002 was one of the most sweeping modernizations
of securities regulation since the enactment of the Securities Act of 1933 and the
Exchange Act of 1934. SOX has specific requirements relating to the composition of the
audit committees (ACs) as ACs play an important role in the financial reporting and
governance process. The Securities and Exchange Commission (SEC) has adopted new
rules related to the independence and functioning of corporate ACs (SEC, 1999a, b,
2003a, b), but there has not been much focus on the issue of gender. In this paper,
I develop arguments as to why I can expect differences in AC behavior due to the
Gender in Management: An
International Journal
Vol. 27 No. 6, 2012
pp. 366-379
q Emerald Group Publishing Limited
1754-2413
DOI 10.1108/17542411211269310

The author sincerely thanks her dissertation advisor, Kannan Raghunandan, for his generous
and wonderful guidance, dedication, support and encouragement. The author thanks
Adelina Broadbridge (Editor) and two anonymous reviewers for their numerous useful comments
and suggestions. The author also thanks Kelly Carter for his timely assistance.

presence of females on the AC. I then empirically test to see if there are indeed
differences in AC behavior due to the presence of females on the AC.
The motivation for this essay comes from the concerns by US SEC (SEC, 1999a, b,
2003a, b) about the importance of the composition and activities of ACs. Private sector
commissions and large audit firms have repeatedly emphasized the need for frequent
AC meetings. The National Commission on Fraudulent Financial Reporting (NCFFR,
1987) recommends regular meetings of the AC as it would enable the AC to have timely
discussions with the internal auditor, management and outside auditors. In an important
speech, the then SEC-Chairman, Levitt (1998) recommends that an AC should hold
at least 12 meetings per year in order to address the interest of the investor.
The Blue Ribbon Commission on Audit Committees that was established following the
speech by Levitt (BRC, 1999a, b) recommends that ACs should hold at least four regular
meetings annually. Regular meetings between ACs, auditors and management
strengthen their relationship and also enable them to address issues well in advance.
PricewaterhouseCoopers (PWC) (1999) states that it is necessary for ACs to hold
regular meetings, as it enables review of financial statements well in advance and
address any issues arising during the meetings. KPMG (1999) recommends at least three
to four AC meetings per year to keep the AC focused.
The absence of females in corporate boards of directors has become the focus of
legislators in some countries (Waters, 2004). Nielsen and Huse (2010) show that board
decision-making can be enhanced with the selection of women directors having different
values but with similar professional experiences. There is also a growing stream of research
indicating that the presence of women could alter corporate decision-making processes.
Arfken et al. (2004) use the state of Tennessee as a case study to show that there is only a
moderate improvement in board diversity. There is extensive prior research in psychology
and sociology indicating that women are more risk-averse than men, and that women are
more likely to use a democratic and trust-building approach to decision-making. Bernardi
and Threadgill (2010) find that there is an association between the number of female
directors on a corporate board and three aspects of corporate social responsibility
namely – charitable contributions, employee benefits and community engagement.
Barber and Odean (2001) find that the stock investment traded by men is 45 percent more
than that of women. Jianakoplos and Bernasek (1998) use US sample data to examine
the differences in the financial risk-taking behavior among men and women. They find
that there is more risk-aversion in financial decision-making among single women than
single men.
Prior studies show that women are under-represented in corporate boards (Burke
and Mattis, 2000). Women can greatly enhance board deliberations because they
“provide unique perspectives, experiences, and work styles as compared to their male
counterparts” (Daily and Dalton, 2003). Huang et al. (2011) find that there are notable
positive cumulative abnormal returns with the appointment of female AC members than
male AC members. Daily and Dalton (2003) argue that women’s “communication styles
tend to be more participative and process-oriented.” Hence, the presence of at least one
female director on the AC will likely lead to an increase in the number of AC meetings
based on previous good outcomes of having women on the board in prior research. This
research paper contributes to the contemporary literature regarding the increased
awareness of positive outcomes associated with having women on the board. Further,
this research paper has implications for regulators and legislators as it recommends

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the appointment of more women on the AC since the presence of females on the AC
makes the AC more diligent. The next section of the paper provides a brief discussion on
the related literature followed by a hypothesis section. This is then followed by sections
on research method and data. Section 5 presents the results from my empirical analysis.
The paper ends with a conclusion section.
2. Related literature
2.1 AC diligence
Menon and Williams (1994) investigate the factors that are associated with meeting
frequency and the presence of insiders on the AC. Their findings show that the AC is
influenced by board composition. The probability that the AC will meet more frequently
increases when there is an increase in the proportion of outside directors. McMullen and
Raghunandan (1996) study the differences in meeting frequency and the composition of
ACs of companies with and without financial problems. They find that there is a lower
likelihood of the AC having solely outside directors in companies having financial
problems. Scarbrough et al. (1998) investigate if there is an association between the
composition of ACs and their interaction with internal auditing. They find that ACs
consisting solely of non-employee directors were likely to have more frequent meetings
with the chief internal auditor. Collier and Gregory (1999) examine if firm-specific agency
factors affect the activity of the AC in major companies in United Kingdom (UK). They
show that there is a positive association between AC activity and high-quality (Big 6)
auditors, consistent with their agency-theoretic view of monitoring. Abbott and Parker
(2000) find that a positive association exists between AC independence (consisting of
non-employees) and activity (at least two meetings per year) with the engagement of an
industry specialist auditor. Abbott et al. (2000) examine if there is an association between
fraudulent financial statements and two AC characteristics (independence and activity).
Their results show that the probability of sanction by SEC is lower if the firm has an AC
that meets at least twice a year and consists of AC members who are non-employees.
Beasley et al. (2000) show that fraudulent companies in the area of technology, healthcare
and financial services have fewer independent boards and ACs. Further, findings show
that there are fewer AC meetings (generally one time per year) in fraud companies of
technology and health care industries compared to no-fraud companies. Raghunandan
et al. (2001) examine the relationship between the composition of ACs and its interaction
with internal auditing. They find that ACs having only independent directors with at least
one financial/accounting expertise will have longer meetings with the chief internal
auditor. Archambeault and DeZoort (2001) examine if there is an association between
suspicious auditor switching and the efficiency of AC characteristics. Their findings show
that companies with suspicious auditor switching are less likely to have frequent
meetings of the AC. Abbott et al. (2003) find a significant positive association between AC
expertise and independence with audit fees. However, they find no association between
AC meeting frequency and audit fees. Abbott et al. (2004) find a significant negative
association between AC independence and meeting frequency during restatement. Song
and Windram (2004) examine the efficiency of UK ACs in monitoring financial reporting.
They find weak evidence that that AC financial literacy, meeting frequency and outside
directorships contribute to the efficiency of the AC. Gendron and Be´dard (2006) show that
the meaning of AC effectiveness is based on the reflection of processes and activities
by attendees during AC meetings. Raghunandan and Rama (2007) examine if there is

a relationship between firm characteristics and the number of AC meetings as a proxy
for diligence. Their results show that there is a higher frequency of AC meetings for firms
that (1) are large, (2) have higher outside block-holding levels or (3) are in industries having
a higher probability of litigation.
In summary, prior research has examined a variety of consequences associated with
AC diligence. Some studies have also examined the determinants of AC diligence.
However, no study has examined the impact of gender differences on AC diligence.
3. Hypothesis development
Prior research suggests that females are more risk-averse, less overconfident, and
possess unique perspectives, experiences, and work styles ( Jianakoplos and Bernasek,
1998; Barber and Odean, 2001; Daily and Dalton, 2003). Studies also show that there is
more competence, stability, independence, friendliness and emotional rationality
among female managers than male managers (Dennis et al., 2004). Ittonen et al. (2011)
show that firms have lower audit fees when there is a female chair on the AC. Similarly,
there are positive abnormal returns with the appointment of female than male on the
AC (Huang et al., 2011). Further, AC directors face significant reputation penalties if
financial reporting problems are subsequently discovered (Srinivasan, 2005). Although
there are numerous prior studies on AC diligence and gender diversity on ACs, there is
no study that examines the effect of gender diversity on AC diligence. Hence, the
possible loss of reputation, coupled with risk-aversion, reduced overconfidence, and
greater likelihood of compliance, suggests that ACs that have a female director will be
more diligent and have more frequent meetings. Moreover, empirical evidence from
prior research also indicates that more frequent AC meetings are associated with lower
likelihood of fraud, SEC sanctions and suspicious auditor switching.
Along these lines, the Conference Board of Canada suggests that boards with more
women “surpass all-male boards in their attention to risk oversight and control”
(Stephenson, 2004). I hypothesize that ACs with at least one female director would have a
more deliberative and process-oriented style of functioning than all-male ACs. There are
many ways in which a committee can be more participative, process-oriented and diligent.
For example, on the quantity dimension, the meetings can be more frequent or longer; on
the quality dimension, the nature of the interaction – both among the committee members,
as well as with others such as management, internal and external auditors – as well as the
types of questions asked can differ. Therefore, my hypothesis is as follows:
H1. Audit committees that have at least one female director will meet more often
than all-male audit committees.
4. Method
I use the following model to examine the association between the presence of a female
director on the AC and AC meeting frequency[1]:
LogðMEETÞ ¼b0 þ b1 LogðMV Þ þ b2 OFDIRW þ b3 OTBLKW þ b4 DA þ b5 LOSS
þ b6 MB þ b7 LTGN þ b8 FINCG þ b9 LogðNMEM Þ þ b10 AUDACXP
þ b11 NACCXP þ b12 SEPCHR þ b13 LogðBDSIZEÞ þ b14 BDIND
þ b15 LogðBDMTGÞ þ b16 FEMD þ 1

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The variables are defined as follows:
LogMV

¼ natural log of market value of firms as of December 31.

OFDIRW

¼ percent of shares held by officers and directors.

OTBLKW

¼ percent of shares held by outside block-holders.

DA

¼ total debt divided by total assets at year-end.

LOSS

¼ 1 if a firm had a loss for 2003, otherwise 0.

MB

¼ ratio of market value to book value as of year-end.

LTGN

¼ 1 if a firm is in any of the following sectors: pharmaceuticals
(SIC codes 2833-2836), computers (3570-3577), electronics
(3600-3674), retail (5200-5961), or software (7370); 0 otherwise.

FINCG

¼ 1 if the number of common shares outstanding or the long-term
debt increased by at least 10 percent, otherwise 0.

LogNMEM

¼ natural log of the number of AC members.

AUDACXP

¼ proportion of directors who are accounting experts (i.e. have
experience as a “public accountant or auditor or principal
financial officer, controller, or principal accounting officer”).

NACCXP

¼ proportion of directors who are designated “AC financial experts”
but are not accounting experts (as defined above).

SEPCHR

¼ 1 if someone other than the CEO is the chairperson of the board.

LogBDSIZE

¼ natural log of the number of board directors in 2003.

BDIND

¼ proportion of independent (not insider or gray) directors on the
board.

LogBDMTG ¼ natural log of the number of board meetings in 2003.
FEMD

¼ 1 if AC has a female director, 0 otherwise.

Log (MEET), measuring the number of annual meetings during 2003, is the dependent
variable. I use a log transformation for the number of meetings (dependent variable) since
the dependent variable was bounded by zero and increasing in steps. I obtain data about
the number of meetings from proxy statements filed by firms during 2004 with the SEC.
FEMD is the independent variable of interest. I obtain data about the composition of
the AC by reading all AC reports included in the proxy statements filed by the firms in
2004 with the SEC. I employ the following rules to classify directors as female. First,
I examined the first name of the director (and, the photos if available) to classify the
person’s gender. If the above rule was inadequate, I then examined the vita of the director
and searched for gender identifiers, such as “Ms”, “she” or “her”.
In my analysis, I control for factors that I believe could be associated with the
frequency of AC meetings. The AC represents a monitoring mechanism, and the demand
for monitoring mechanisms varies with agency costs. Since meeting frequency is the
only publicly available signal about the diligence of the committee, I expect that ACs

of firms with greater agency costs would be likely to have more frequent meetings.
I consider four different variables for agency costs. Those four variables are discussed
below.
Firm size is typically used as a control variable in most accounting and auditing
research, and can serve as a proxy for a variety of factors, including complexity,
monitoring demands, and political costs. I include firm size (market value) as a control
factor and expect that larger firms would have more frequent AC meetings.
Increase in managerial ownership causes a decrease in agency costs ( Jensen and
Meckling, 1976). DeFond (1992) finds that there is a negative correlation between
changes in insider ownership and changes in audit firm quality. Thus, higher levels of
insider ownership can act as a substitute for a more active AC. Therefore, firms with a
lower level of insider stock ownership (i.e. higher agency costs) are expected to have
more frequent AC meetings.
Large shareholders have an incentive to monitor managerial behavior because of
their larger investment (Shleifer and Vishny, 1997), and prior research suggests that
such shareholders play an important role in firm governance through their monitoring of
management (Shleifer and Vishny, 1986; Bethel et al., 1998; Bhojraj, 2003). While I expect
that large block-holders will monitor the firm more closely than other investors, I do not
make a directional prediction about the association between block-holdings and
AC meeting frequency. One argument is that large block-holders will demand
more monitoring from the AC, leading to a positive association between block-holdings
and AC meeting frequency. The counter-argument is that the large investors have
sufficient alternative monitoring mechanisms so that the demand for a more diligent AC
would be lower at firms with large block-holdings.
I use two control variables relating to the composition of the AC. First, I posit that
committees that have more members will be likely to have more frequent meetings. It is
likely that as the number of members on the committee increases there will be more
questions or items that may need to be discussed, so it is likely that there will be more
frequent meetings. Second, prior studies have documented an association between AC
financial expertise and a variety of “good” processes and outcomes, including support
for auditors’ judgments (DeZoort, 1998), lower likelihood of suspicious auditor switches
(Archambeault and DeZoort, 2001), fewer SEC enforcement actions (McMullen and
Raghunandan, 1996), less earnings management (Bedard et al., 2004), and higher firm
value (DeFond et al., 2005). I expect a positive association between the presence of AC
financial experts and the frequency of AC meetings. I define an accounting/finance
expert as a person who is either a CPA or has experience as a chief financial officer, chief
accounting officer, or controller of a for-profit corporation[2].
5. Data
My sample selection was guided by the following factors. First, AC data had to be
hand-collected from proxy statements; hence I wanted to keep the sample size
manageable. Second, I wanted to concentrate on firms where the importance of the AC
would be more; hence I decided to concentrate on smaller firms since large firms are
likely to have other monitoring mechanisms, such as analyst following. Third, I wanted
to see the immediate effect of SOX on AC diligence since there was strong focus on the
efficiency of the AC following the collapse of Enron, WorldCom, etc. Hence, I chose the
2003 year sample instead of other years. Fourth, given the changes in regulations,

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I wanted to restrict the analysis to firms with an identical fiscal year-end. Hence,
I decided to restrict the analysis to firms with a December 31 fiscal year-end.
Based on the above criteria, I restrict my analysis to all non-financial firms with a
December 31 fiscal year-end in the S&P SmallCap 600 index. Of the 600 firms in the
index, 276 are in non-financial sectors and have a December 31 fiscal year-end in 2003.
An additional 22 firms did not have the required AC data (due to lack of proxy filings), so
my final sample includes 254 firms. I obtain the data from firm filings with the SEC and
from the Compustat database. Since the data was hand-collected, there was a great
likelihood of human error. In order to overcome this problem, I had to meticulously check
the hand-collected data to ensure its validity. Similarly, my results have to be explained
with caution as it cannot be generalized for countries other than USA.
6. Results
Table I provides the sample-selection process, and Table II provides descriptive data
about the sample. The mean (median) market value of the firms included in my sample is
$687 ($618) million. Given that my focus is on relatively smaller firms, it is not surprising
that officers/directors and outside block-holders hold an average of 11.73 and
23.79 percent, respectively, of the shares. The average debt-to-asset ratio is 0.44, while
the mean market-to-book ratio is 2.52. Out of the total firms, 19 percent of the firms are
operating in litigious industries, and 23 percent of the firms are having financing during
the year. The firms had an average of 6.71 board meetings during the year.
The sample companies have, on average, 3.53 members on their ACs. While 247 of
the 254 firms in my sample indicated that they had at least one AC financial expert using
the SEC’s expanded definition, only 146 of the firms had an AC financial expert using the
stricter definition used in this paper. The average number of AC financial experts using
the SEC’s liberal definition is 1.45, but is only 0.7 when using the stricter definition for
such an expert as in the current study.
The mean (median) number of AC meetings is 7.06 (7.0), and 247 of the 254 firms
report having at least four meetings in 2003. These numbers are much higher than those
reported in some recent studies that have examined issues related to ACs (Abbott et al.,
2003), and indicate that ACs are much more diligent in the post-SOX period than in
pre-SOX period.
Only 54 of the 254 firms in my sample have at least one female as an AC member; 47 of
these 54 firms have only one female AC director, while the remaining seven have two
female AC directors. In only two of the 254 firms, women constitute a majority of the
ACs members.
Analysis of Spearman and Pearson correlations involving the explanatory
variables indicates that only four of the correlations exceed 0.30, suggesting that
multicollinearity is not likely to be a problem. This is confirmed later by VIF scores,
none of which exceeds 1.55, from my regression. Table III presents descriptive data

Table I.
Sample selection 2003

Firms from the S&P SmallCap 600 index
Less: fiscal year-end other than December 31
Less: SIC between 6000 and 6999
Less: missing data due to lack of proxy filings
Total

600
2260
264
222
254

Variable

Mean

SD

25th percentile

Median

75th percentile

LogMV
OFDIRW
OTBLKW
DA
LOSS
MB
LTGN
FINCG
LnNMEM
AUDACXP
NACCXP
SEPCHR
LnBDSIZE
BDIND
LnBDMTG
FEMD

20.17
11.73
23.79
0.44
0.19
2.52
0.19
0.22
1.24
0.67
0.79
0.40
2.06
69.09
1.85
0.21

0.63
11.19
14.30
0.21
0.39
1.37
0.40
0.42
0.20
0.68
0.96
0.49
0.22
14.15
0.35
0.41

19.77
4.90
12.40
0.27
0.00
1.57
0.00
0.00
1.10
0.00
0.00
0.00
1.95
60.00
1.61
0.00

20.25
8.15
24.40
0.45
0.00
2.06
0.00
0.00
1.10
1.00
1.00
0.00
2.08
71.40
1.79
0.00

20.60
14.90
33.20
0.59
0.00
3.05
0.00
0.00
1.39
1.00
1.00
1.00
2.20
80.00
2.08
0.00

Notes: The sample includes 254 observations from non-financial firms with a December 31 fiscal
year-end in the S&P SmallCap 600 index and Compustat databases; data about ACs were handcollected from proxy statements filed with SEC; variables are defined as follows: LogMV – natural log
of market value of firms as of December 31, 2003; OFDIRW – percent of shares held by officers and
directors; OTBLKW – percent of shares held by outside block-holders; DA – total debt divided by
total assets at year-end; LOSS – 1 if a firm had a loss for 2003, otherwise 0; MB – ratio of market value
to book value as of year-end; LTGN – 1 if a firm is in any of the following sectors: pharmaceuticals
(SIC codes 2833-2836), computers (3570-3577), electronics (3600-3674), retail (5200-5961), or software
(7370); 0 otherwise; FINCG – 1 if the number of common shares outstanding or the long-term debt
increased by atleast 10 percent, otherwise 0; LnNMEM – natural log of the number of AC members;
AUDACXP – proportion of directors who are accounting experts (i.e. have experience as a
“public accountant or auditor or principal financial officer, controller, or principal accounting officer”);
NACCXP – proportion of directors who are designated “AC financial experts” but are not accounting
experts (as defined above); SEPCHR – 1 if someone other than the CEO is the chairperson of the board;
LnBDSIZE – natural log of the AC members in 2003; BDIND – proportion of independent (not insider
or gray) directors on the board; LnBDMTG – natural log of the number of board meetings in 2003;
FEMD – 1 if AC has a female director, 0 otherwise

Number of meetings
Less than 3

Number of companies (%)
4 (1.6)

3
4
5
6
7
8
9
10-12
.12

3 (1.2)
35 (13.8)
44 (17.3)
27 (10.6)
35 (13.8)
36 (14.2)
33 (13.0)
29 (11.4)
8 (3.1)

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Table II.
Descriptive statistics:
meetings sample

Table III.
Descriptive data on
number of AC meetings
in 2003

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Table IV.
AC meetings with and
without a female director

on the number of AC meetings, and Tables IV and VI present univariate comparisons
between companies with and without a female AC director. The companies that have a
female AC director have more AC members and are larger in size. In terms of the variable
of interest, the average number of meetings for ACs with and without at least one female
director is 8.06 and 6.8, respectively; the difference is statistically significant ( p , 0.01).
Thus, 212 of the total 254 firms in my sample (83.4 percent) had more than four meetings.
Table V presents the regression results. The overall regression is significant
(F ¼ 3.65, p , 0.001). The positive (negative) and significant coefficient on OUTBLK

AC meetings

FEMD ¼ 0
(n ¼ 200 firms)

FEMD ¼ 1
(n ¼ 54 firms)

Less than 3
3
4
5
6
7
8
9
10-12
. 12

4 (2.0%)
3 (1.5%)
30 (15.0%)
38 (19.0%)
20 (10.0%)
30 (15.0%)
27 (13.5%)
24 (12.0%)
21 (10.5%)
3 (1.5%)

0 (0%)
0 (0%)
5 (9.26%)
6 (11.11%)
7 (12.96%)
5 (9.26%)
9 (16.67%)
9 (16.67%)
8 (14.81%)
5 (9.26%)

Notes: The sample includes 254 observations from non-financial firms with a December 31 fiscal
year-end in the S&P SmallCap 600 index and Compustat databases; data about ACs were handcollected from proxy statements filed with SEC. 3; see Table II for definition of variables

Variable
Intercept
LogMV
OFDIRW
OTBLKW
DA
LOSS
MB
LTGN
FINCG
LogNMEM
AUDACXP
NACCXP
SEPCHR
LogBDSIZE
BDIND
LogBDMTG
FEMD
Table V.
Audit meetings
regression results

Coefficient

t-stat.

p-value

20.273
0.051
20.004
0.004
20.068
20.043
20.024
0.092
0.031
0.275
0.232
0.056
0.062
0.085
0.003
0.161
0.096

20.332
1.252
21.680
2.611
20.538
20.721
21.189
1.600
0.563
1.991
1.891
0.609
1.315
0.690
1.788
2.366
1.725

0.740
0.212
0.094
0.010
0.591
0.471
0.236
0.111
0.574
0.048
0.060
0.543
0.190
0.491
0.075
0.019
0.086

Notes: n ¼ 248; F stat. ¼ 3.65; p , 0.001; Adj. R 2 ¼ 0.15; this table presents the results from
regression with the natural logarithm of audit meetings as the dependent variable; the sample includes
all non-financial firms in the S&P SmallCap 600 with a December 31, 2003 fiscal year-end and
available proxy data; see Table II for definition of variables

(OFFDIR) indicates that companies with a higher percentage of shares held by outside
block-holders (insiders) are likely to have more (less) frequent AC meetings. Coming to
the audit-committee-related variables, the positive and significant coefficients for
NMEM indicate that ACs are likely to meet more often when they have more members.
The coefficient on the variable of interest, FEMD, is 0.096 and significant – indicating that
ACs that have at least one female director are likely to have more frequent meetings than
all-male ACs. The value of the coefficient also indicates that, on average, the presence of at
least one female director leads to a 10 percent increase in the number of AC meetings.
I performed the following sensitivity tests. I use various combinations of a dummy
or continuous variable for the presence of a female director and for the presence of
financial experts. Instead of the number of meetings and the number of AC members, I use
the square-root of the respective measures. I performed regressions using various
combinations of the above variations. In each instance, the results remain substantively
similar – the FEMD variable continues to remain positive and significant in the regression.
My sample includes:
.
five firms that have an auditor change in 2003; and
.
ten firms audited by non-Big 4 firms.

Audit committee
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Deleting either the firms with an auditor change, or the firms audited by a non-Big 4
firm, yields similar results for all variables in my model. In addition, I checked if clients
of any particular Big 4 firm were driving the results. I add three dummy variables in
the regression for such analysis, but none of the dummy variables is significant and the
inferences related to the other variables remain unchanged.
Further analysis
Given the significant changes to the accounting profession during the period from
November 2001 to July 2002, including the failures of Enron and Arthur Andersen as
well as the enactment of SOX, one interesting question is whether the gender effects were
prevalent before SOX. The mean (median) number of AC meetings in firms with and
without a female director on the committee was 4.21 (4) and 4.28 (4), in 2001 and in 2003,
respectively. This difference is not statistically significant[3]. I also performed
a regression for fiscal year 2001 similar to the 2003 regression in Table V; in this multiple
regression the FEMD variable was not significant for 2001. Thus, the results indicate
that ACs that had at least one female director reacted differently to the shocks faced by
the accounting profession in 2001-2002 (Table VI).
7. Conclusion
There has been a growing concern by US SEC about the role and function of the ACs.
Moreover, there has been much emphasis on the frequency of the AC by private sector

At least one female director on AC
Year

Yes

No

2003
2001

8.06 (8)
4.21 (4)

6.77 (7)
4.28 (4)

Table VI.
Mean (median) number of
AC meetings in ACs with
and without female
directors

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commission as regular meetings lead to good outcomes. Also, the absence of females
in corporate boards has become the focus of legislators and regulators in many
countries, especially with women being more risk-averse and adopting a trust-building
approach than men as proven in prior sociology and psychology research. I hypothesize
that the presence of females would change the dynamics of the board as well as the
various board committees.
The number of meetings represents the only publicly available signal related to the
functioning of ACs. If women’s communication styles tend to be more participative and
process-oriented, then it is likely that ACs that include at least one female director would
have more frequent meetings than all-male ACs. In this paper, I examine the relationship
between the presence of females on the AC and AC meeting frequency, which is used as
a proxy for AC diligence. I use a sample of 254 firms from the S&P SmallCap 600. I find
consistent evidence to show that AC with at least one female director were more likely to
meet more often than all-male ACs. The finding in this paper strongly contributes to the
contemporary literature regarding the increased awareness of good outcomes associated
with having women on the AC in various ways. Good corporate governance practices
are established when there is increased AC diligence. Also, the presence of female on
the AC leads to good corporate decision-making. In general, the presence of females
on corporate boards has shown to bring considerable improvements in the financial
quality and stability of the corporations thereby, enhancing good governance practices.
The findings from this research can have the following implications. (I) one implication
of this research is to encourage the appointment of more females on the AC since female
members are more likely to make the AC more diligent. Diligence of the AC leads to good
outcomes, such as lesser SEC enforcements, fewer restatements and good financial
reporting quality (based on prior research). Another implication of this research is to
recommend the appointment of more females on the corporate board as females alter the
corporate decision process in a positive manner. This can further enhance the confidence
of the public, especially at a time when people’s confidence in public companies has
taken a serious setback. Empirical findings in this research show that gender differences
on the AC, which lead to greater diligence, may have important implication on the quality
of the firm’s audit. My study is subject to the following limitations. First, the number of
meetings is only a rough proxy for the diligence of ACs. I do not have information about
the length of the meetings, or about the nature of the interaction:
.
among the committee members; or
.
between the committee and other participants, such as management, internal
auditors, and external auditors.
In theory, it is possible for an AC to have fewer meetings but be more diligent, ask more
informed questions and have more productive meetings. Second, it is an open question
whether the observed pattern of differences would hold in countries other than the
USA. Each of the limitations noted above also represents possible avenues for future
research. Future research can also examine the effect of AC diligence and other gender
characteristics.
Notes
1. This is similar to the model used by Raghunandan and Rama (2007); I add gender as an
additional explanatory variable.

2. Section 407 of SOX (and the initial SEC rule proposal implementing that section) specified
that the “AC financial expert” must have “experience preparing or auditing financial
statements” but the final SEC rules changed it to “experience preparing, auditing, analyzing or
evaluating financial statements” (SEC, 2003a). Thus, for example, a CEO without
significant prior accounting or finance background would qualify as an AC financial expert
under the final SEC rule but not under the original language of SOX or the initial SEC rule
proposal.
3. Note that some of the firms that had a female on the AC in 2001 did not have a female in
2003, and vice-versa. Hence, we also examined the mean (median) number of meetings based
on the presence of a female on the AC in 2003. The mean (median) number of AC meetings
during 2001 for those 54 firms that had a female director on the AC in 2003 was 4.60 (4); the
corresponding number for the 200 firms without a female director on the AC was 4.20 (4).
This difference is also not statistically significant.
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About the author
Sheela Thiruvadi is an Assistant Professor of Accounting at the Earl G. Graves School of
Business and Management in Morgan State University. She holds a PhD in Accounting
(Florida International University, USA). Her research interest covers areas in auditing, gender,
outsourcing, information systems, earnings management and corporate governance. She has
published papers in Accounting Horizons, International Journal of Public Information Systems,
Gender in Management and Information Technology Journal. Currently, she serves as a reviewer
in the Afro-Asian Journal of Finance and Accounting (AAJFA). Sheela Thiruvadi can be
contacted at: Sheela.thiruvadi@morgan.edu

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