Assessing the Impact of Audit Committee Independence on the Credibility of Financial Statements

Posted: Aug 08, 2024

• Tessa Owens
• Gavin Holmes
• Leah Dean

Abstract

The credibility of financial statements represents a cornerstone of efficient capital markets and investor confidence. While extensive research has examined various corporate governance mechanisms, the specific relationship between audit committee independence and financial statement credibility remains inadequately explored through computational methodologies. Traditional approaches have predominantly relied on manual content analysis and statistical correlation studies, which often fail to capture the nuanced linguistic patterns and disclosure quality that characterize credible financial reporting. This research addresses this gap by introducing an innovative computational framework that leverages natural language processing and machine learning to quantitatively assess financial statement credibility. Our study is motivated by the increasing complexity of financial reporting environments and the growing demand for more sophisticated tools to evaluate corporate governance effectiveness.