Regulators often view independent auditors as “public watchdogs” over Corporate
America (Levitt 1998, 5). However, according to Arthur Levitt, chairman of the Securities
and Exchange Commission, “even these watchdogs need help in performing their vital
role, and that responsibility belongs to the audit committee” (1998, 5). Birkett’s (1986)
historical analysis suggests that audit committees were established primarily to safeguard
the independence of the external auditor, and prior research suggests that audit
committees strengthen the auditor’s position in disputes with management (e.g., Knapp 1987). More recently, Levitt (2000) has indicated that safeguarding the independence of
the accounting profession has never been more important.