Investigating the Effect of Audit Committee's Activities on Financial Reporting

Financial scandals and massive fraud in recent years encouragelawmakers and regulators to strengthen corporate governance, includingcreation the audit committee. Among many objectives that considered in audit committee, including improving of quality financial reporting and financial health as well as increased transparency and disclosure of information. A subject that discussed in this paper is how much effective the committee in achieving consider goals. In this study disclosure score, and prior period adjustments use as measure of quality of financial reporting. By applying pre-test and post-test for both test and control groups, evaluated effect of the audit committee's activities on financial reporting. Data used from 1391 to 1394. Results show there is not significant differences between the disclosure score and the number and relation of prior period adjustments gap, post-test between experimental and control groups. Contrary to these findings, the results of additional tests based on the method of the event study show that the formation of audit committees for testing companies and without regard to control groups, led to a reduction in the number of prior period adjustments and increase the disclosure score of corporate information.