Universal Journal of Accounting and Finance Vol. 1(3), pp. 103 - 106
DOI: 10.13189/ujaf.2013.010303
Reprint (PDF) (149Kb)


Does a Financial Expert’s Audit Committee Presence Enhance American Nonprofit Financial Reporting Quality? Donors Decide


R. Steven Flynn *
Department of Accountancy, Thomas More College, Crestview Hills, Kentucky, USA

ABSTRACT

California’s passage of the Nonprofit Integrity Act in 2004, followed by the enactment of similar legislation in other American states, has resulted in a series of new financial reporting requirements for many larger nonprofit organizations. Chief among the provisions of several of these legislative pieces is the requirement for nonprofit entities to form separate audit committees. Following the lead established in the for-profit sector, advocates have strongly urged nonprofit organizations to include at least one financial expert among audit committee members to augment actual and perceived financial reporting integrity. However, advocates’ acknowledgement of the challenge of recruiting these individuals leads one to question their ultimate worth to nonprofit organizations. Recognizing the significance of this issue, this study investigates individual donors’ impressions regarding the inclusion of financial experts among nonprofit audit committee members. Using an experimental case as the basis for exploration, the study finds that donors generally do not perceive financial experts as enhancing the credibility of nonprofit organizations’ financial statements. In light of the significance of individual donor contributions to entities’ continued financial sustainability, these findings represent potentially important considerations for nonprofit organizations as they weigh the costs and benefits of enlisting busy financial professionals for audit committee service.

KEYWORDS
Nonprofit Audit Committees, Financial Experts, Nonprofit Reporting Quality, Donor Impression

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] R. Steven Flynn , "Does a Financial Expert’s Audit Committee Presence Enhance American Nonprofit Financial Reporting Quality? Donors Decide," Universal Journal of Accounting and Finance, Vol. 1, No. 3, pp. 103 - 106, 2013. DOI: 10.13189/ujaf.2013.010303.

(b). APA Format:
R. Steven Flynn (2013). Does a Financial Expert’s Audit Committee Presence Enhance American Nonprofit Financial Reporting Quality? Donors Decide. Universal Journal of Accounting and Finance, 1(3), 103 - 106. DOI: 10.13189/ujaf.2013.010303.