Although prior research suggests audit committee characteristics are related to fees paid to the
external auditor (e.g., Carcello et al., 2002a; Vermeer et al., forthcoming), we do not know from prior
research how the characteristics of the audit committee are related to the internal audit budget. This
is an important question because the resources and support audit committees may require from the
internal audit function could be contingent on the resources, such as expertise and diligence, directors
bring to the audit committee. Accordingly, we provide the first empirical evidence of how the characteristics
of the audit committee are related to the extent of investment in internal auditing.
Our analyses, using data from 181 SEC registrants, indicate that the internal audit budget is negatively