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The Role of Audit Committees in Nonprofit Organizations: An Empirical Investigation
Annette K. Pridgen,
University of Mississippi
Karl J. Wang, University of Mississippi
ABSTRACT. Public leaders advocate the use of audit committees in nonprofit organizations. This study examines whether the use of audit committees by nonprofits improves organizational accountability, as measured by the likelihood of reported internal control weaknesses. A sample of nonprofit hospitals, subject to the Single Audit Act, was selected for the years 2001 to 2004. We find the reported internal control weaknesses in administering federal programs in these organizations were significantly less with the presence of an audit committee in 2002, but we do not find such a relationship in the other three years. Our data also show no relationship between audit committees and reported internal control weaknesses in financial reporting associated with these organizations’ financial statement audits. Overall, these results seem to support the notion that audit committees function differently in nonprofit organizations than in corporations (Vermeer, Raghunandan, and Forgione, 2006).
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