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This study examines whether the presence of audit committees for US commercial bank registrants (SEC Form 10‐K filers) significantly affects the likelihood of adoption by certain non‐US commercial bank registrants (SEC Form 20‐F filers). Results of a logistic regression analysis of 31 US commercial bank registrants with audit committees and 31 non‐US commercial bank registrants without audit committees suggest that demand for oversight protection in the sample non‐US commercial banks is more likely to increase as the total market capitalization (size) increases. Additionally, this paper investigates whether the presence of audit committees for non‐US commercial bank registrants (Form 20‐F filers) increases their transparency with a concomitant effect on infusion of foreign equity investment. Results of a logistic regression analysis suggest that the presence of audit committees does not significantly affect the likelihood of an increase in the banks’ American depository receipts.

To investigate the recommendations of the Blue Ribbon Committee (BRC) and the requirements of the Sarbanes‐Oxley Act (SOX) on audit committee alignment.

Using a unique set of hand collected data on audit committees for a sample of 129 firms during 1999, 2000, and 2002. This study is separated into two phases: the first phase of the study investigates the impact of the recommendations of the BRC on improving the effectiveness of audit committee on audit committee alignment; the second phase of the study investigates the impact of the SOX on audit committee alignment.

For the BRC period, the results indicate that firms with audit committee alignment have larger total assets, have higher leverage and firms with audit committee alignment are more likely listed in NASDAQ. For the SOX period, the evidence suggests that firms with audit committee alignment are more likely to be associated with larger audit committee, higher directors' compensation, higher audit committee independence, and more audit committee meetings. Also audit committee alignment is more likely to occur in NASDAQ firms. The evidence also shows that firms experiencing audit committee alignment in 2002 are associated with less earnings management (EM) and less increase in EM.

This study shows that how boards of directors aligned their audit committees in response to the recommendations of the BRC and the requirements of the SOX.

Our paper should be of interest to managers, audit committees, boards of directors, and regulators who focus on audit committees.

This paper contributes to the auditing literature by showing how audit committees changed in response to recommendations of the BRC and the SOX. It also contributes to the literature by showing that firms experiencing audit committee alignment engage less in EM.