Audit committee expertise in large European firms

Abstract

Purpose This paper aims to study how audit committee member expertise is related to certain features of the committee and to the audit process. Design/methodology/approach Based on information from 2,477 directors from 296 firms in eight European countries between 2005 and 2014, this study measures average audit committee expertise using a continuous variable, which combines education-based and experience-based expertise. Different measures of the audit process are then regressed against this and other control variables. Findings Average committee expertise has increased in recent years. Education-based and experience-based expertise seem to be complementary. Results also show that committees with greater expertise meet more frequently, have fewer directors with full-time dedication and pay lower audit fees. There is no link to changes in the external firm audit, which may be due to mandatory auditor rotation. Originality/value The paper provides a comprehensive metric of audit committee expertise that includes directors’ academic background, professional experience and qualifications. In addition, this study expands current knowledge concerning whether and how committee expertise affects the audit process.

The influence of board social capital on corporate social responsibility reporting

“…Our measure for board social capital refers to board multiple directorships (DIRECTORSHIPSs). In line with previous research, this variable is calculated as the average number of outside boards on which directors sit in the same year (Hillman et al , 2011; Baccouche et al , 2014; Bravo and Reguera-Alvarado, 2019; Zarza-Herranz et al , 2020). To that end, each director biography was previously examined to count this person's every appointment on any board of directors, both in firms from our sample and in any other additional firm.…”

The desire of prestigious audit committee chairs: what are the benefits for financial reporting quality?

“…This study has several implications for future research. Academics should pay more attention to the prestige and influence connected to previous experience and specific networks of AC chairs and members (Zarza Herranz et al , 2020). For instance, further research could consider chairs’ political work experience, which is likely to provide valuable connections and privileged information to the AC (Pascual and Crespí, 2018; Kang and Zhang, 2018).…”

Which attributes of audit committees are most beneficial for European companies? Literature review and research recommendations

“…Focusing on various aspects of experiences, AC experience increases audit fees (Drogalas et al , 2021; Greece), and informal interactions with internal audits strengthen internal audit quality (Zaman and Sarens, 2013; UK). However, AC education or experience and audit firm rotation were not significantly related (Herranz et al , 2020; cross country). Moreover, co-working experience does not impact audit fees (Alhababsah and Alhaj-Ismail, 2021; UK).…”

“…Moreover, co-working experience does not impact audit fees (Alhababsah and Alhaj-Ismail, 2021; UK). Based on a cross-country setting, Herranz et al (2020) reported a negative link between education-based expertise and audit fees.…”