University of Tennessee

Cunningham, AIM Professor, Wins Research Grant From Center for Audit Quality

December 17, 2021

The Center for Audit Quality (CAQ) has awarded a Research Advisory Board (RAB) grant to Lauren Cunningham, associate professor in the Department of Accounting and Information Management, and her co-authors Sarah Stein, Kimberly Walker and Karneisha Wolfe, all from Virginia Tech’s Department of Accounting and Information Systems. Cunningham is the director of research for the Neel Corporate Governance Center at the University of Tennessee, Knoxville’s Haslam College Business

Through its RAB, the CAQ annually awards grants to fund audit-related scholarly research. The highly selective program funds only a few grant proposals each year. The proposal from Cunningham and her co-authors, “Insights into the Black Box of Audit Committee Performance: Private Evaluations and Public Disclosures” (later renamed “The Evolving Responsibilities of the Audit Committee”), was the only study selected for funding during the RAB 2021 grant cycle.

Project Will Focus on Audit Committee Duties and Evaluations

The Sarbanes-Oxley (SOX) Act of 2002 mandates that audit committees take direct responsibility for appointing, compensating and overseeing a company’s independent auditor and monitoring the caliber of the financial reporting process. Many audit committees take on additional responsibilities, such as making sure the company meets operational and strategic goals, supervising internal audit functions and fulfilling other oversight and advising duties.

In their grant-funded study, Cunningham and her co-authors will interview directors who sit on the audit committees of U.S. publicly-traded companies to gain insight about committee members’ experiences, responsibilities, best practices and challenges. The research team will analyze trends in audit committee-related disclosures to learn how these committees decide what to disclose publicly about their duties and how they evaluate their performance in this capacity.

“We are very excited about this funding opportunity from the CAQ – not only will it help to fund the cost of this research, but the CAQ offers invaluable insights into current issues affecting audit committees,” Cunningham says. “The project will be stronger because of their funding and their guidance.”

To learn more about this research or to connect Cunningham with someone who may be willing to be interviewed, please contact her at lcunningham@utk.edu.

Additional Research From Cunningham, Neal and Colleagues

In addition to the CAQ-funded project, Cunningham has two other studies at various stages of completion, one investigating the benefits and challenges of evaluating corporate governance and one examining the SEC filing process.

“The Evaluation of Corporate Governance: Evidence from the Field,” co-authored by Cunningham, Christie Hayne (University of Illinois at Urbana-Champaign), Terry Neal (Richard Townsend Distinguished Accounting Professor and Haslam Family Faculty Research Fellow at Haslam, head of the college’s Department of Accounting and Information Management and director of the Neel Corporate Governance Center) and Sarah Stein (Virginia Tech), is in progress. The researchers interviewed chief audit executives from publicly-traded companies in the U.S. about how they evaluate corporate governance and how they would evaluate governance at a peer firm. 

“The processes that CAEs described for how they would evaluate governance at a peer firm are quite clever, involving a combination of reviewing current documentation, conducting interviews and sending surveys to a variety of employees throughout the company,” Cunningham says.  “However, it appears that they’re often not incorporating these same recommendations within their own firms – in other words, they know what they would want to do to evaluate governance, but it’s often not happening within their own firms.”

To monitor and enhance the quality of information available to investors, the Securities and Exchange Commission (SEC) reviews companies’ filings for applicable financial reporting and disclosure compliance. In “The SEC Filing Review Process: A Survey and Future Research Opportunities,” forthcoming in Contemporary Accounting Research, Cunningham and co-author Jacob Leidner (University of Würzburg) survey and comment on the rapidly growing body of accounting literature that examines the filing review process, and identify gaps that future research should address. The study also summarizes the institutional features of the filing review process, aiming to inform future academic studies. 

“Our survey should interest both academics and market participants evaluating the effectiveness and efficiency of the filing review process,” Cunningham says.

About the Center for Audit Quality

The Center for Audit Quality (CAQ) is an autonomous public policy organization dedicated to enhancing investor confidence and public trust in the global capital markets. The CAQ fosters high-quality performance by public company auditors, convenes and collaborates with other stakeholders to advance the discussion of critical issues requiring action and intervention, and advocates policies and standards that promote public company auditors’ objectivity, effectiveness and responsiveness to dynamic market conditions.

The CAQ is committed to providing opportunities for the academic community to work closely with the profession. In 2008, the center established a Research Advisory Board (RAB), comprised of representatives from academia and the profession, which reviews proposals relating to scholarly research in auditing. To date, the RAB has awarded 49 grants for independent academic research projects on topics of interest to the profession. 

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CONTACT:

Stacy Estep, writer/publicist, sestep3@utk.edu