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

Abstract

Purpose This paper aims to review 68 archival studies on the impact of audit committees (ACs) on firms’ consequences [(non)financial reporting, performance and audit quality] in European firms. Design/methodology/approach Applying a stakeholder agency-theoretical framework, the author differentiates between three categories of AC variables: presence; composition; and resources, incentives and diligence. Findings The author finds that AC composition, (non)financial reporting and audit quality are dominant in the literature review. Other inputs or outputs are either too low in amount or yielded heterogeneous results, hindering clear tendencies. However, there are indications that financial expertise is positively related to financial reporting and audit quality, in line with agency theory and European regulatory assumptions. Research limitations/implications In the discussion of potential future research, the author emphasizes, among others, the need for the recognition of innovative and sustainable AC variables, inclusion of moderator and especially mediator variables and reaction to endogeneity concerns by advanced regression models. Practical implications As the European Commission currently discusses extended regulations on AC duties and composition, this literature review highlights the huge impact of financial expertise on financial reporting and audit quality. In view of the increased monitoring duties of sustainability reporting, both business practices and regulatory bodies should increase the sustainability expertise of ACs. Originality/value This analysis makes useful contributions to prior research by focusing on attributes of AC and their impact on firms’ outputs in the European capital market, based on a differentiation between mandatory one-tier/two-tier systems and the choice model. The findings support the promotion of European evidence-based regulations, such as the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive.

The Impact of Audit Oversight Quality on the Financial Performance of U.S. Firms: A Subjective Assessment

“…Likewise, an excessive number of corrupt audit committee members expanded the size, without the additional expertise to ensure accuracy of financial reporting, thereby depressing the firm's value. Velte (2023) concluded that conflicting findings regarding the value of the audit committee size and frequency of meetings could be resolved by the finding of a non-linear relationship between these variables and firm performance. Both the audit committee size and frequency of meetings rise, level off, and then decline, suggesting that there is an optimal level for both variables to improve firm performance.…”

The quality assessment of stakeholder engagement disclosure in the EU mandatory non-financial reporting framework

“…Consistent with this vision, SE has been considered a corporate social responsibility tool (Lopatta et al, 2017) that is useful for reducing the information asymmetries between firms and investors (Garc ıa-S anchez and Noguera-G amez, 2017) and introducing good corporate governance practices (Devinney et al, 2013;Fassin and Van Rossem, 2009;Klein et al, 2019). Moreover, the involvement of stakeholders belonging to a company's corporate governance system, such as the board members or the audit committees (Velte, 2023), in the NFR process appears to give positive results in pursuing sustainability aims aligned with the Sustainable Development Goals (Cosma et al, 2022).…”

“…, 2019). Moreover, the involvement of stakeholders belonging to a company's corporate governance system, such as the board members or the audit committees (Velte, 2023), in the NFR process appears to give positive results in pursuing sustainability aims aligned with the Sustainable Development Goals (Cosma et al. , 2022).…”

Viðhorf endurskoðenda til endurskoðunarnefnda

“…Skilvirkni endurskoðunarnefnda hefur verið rannsökuð út frá ólíkum þáttum sem miðar að því að skilja hvernig má efla starf endurskoðunarnefnda, t.d. út frá samsetningu, skipulagi, þátttöku og haefni (Velte, 2023;Malic, 2014;Ghafran og O'Sullivan, 2013;Turley og Zaman, 2004;DeZoort o.fl., 2002). Það eru hins vegar skortur á rannsóknum sem reynir að meta skilvirkni endurskoðunarnefnda út frá viðhorfi hagaðila í ferlinu.…”

“…Þrátt fyrir fjölda rannsókna er enn takmörkuð þekking á því hvernig eignarhald, skipulag stjórna og gaeði ákvarðana hafa áhrif á efnahagslegan ávinning m.t.t. stjórnarhátta (Ahrens o.fl., 2009;Nguyen og Dao, 2022;Velte, 2023 ).…”