Interest in audit committees as part of overall corporate governance has increased dramatically in recent years, with a specific emphasis on member independence, experience, and knowledge. This paper reports the results of a study investigating whether audit committee members' corporate governance experience and financial-reporting and audit knowledge affect their judgments in auditor-corporate management conflict situations. A sample of 68 audit committee members completed an accounting policy dispute case and several knowledge and ability tests. The results indicate that, as expected, greater independent director experience and greater audit knowledge was associated with higher audit committee member support for an auditor who advocated a “substance over form” approach in the dispute with client management. Conversely, concurrent experience as a board director and a senior member of management was associated with increased support for management. Collectively, these findings have a number of implications for practice and research. The results provide justification for calls that audit committees be composed completely of independent directors. The results also support auditor concerns that varying knowledge levels lead to systematic differences in audit committee member judgments in disputes between auditors and management.

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This study evaluates management accountants' susceptibility to inappropriate obedience pressure to create budget slack in violation of corporate policy. We also evaluate links between pressure effects and perceived responsibility, decision justifications, and underlying ethical dimensions. The results of an experiment with 77 management accountants reveal that despite pervasive perceptions of ethical conflict, almost half of the participants violated explicit policy and created budgetary slack when faced with obedience pressure from an immediate superior. The results also indicate that participants who added slack to their initial budget recommendation found themselves less responsible for their budget decision than did participants who refused to add slack. In addition, a majority of the participants indicated that the creation of budgetary slack was unfair, unjust, and/or contrary to their duties.