The Effect of Audit Committee Industry Expertise on Monitoring the Financial Reporting Process

• 成果类型: Article
• 署名作者: Cohen, Jeffrey R.; Hoitash, Udi; Krishnamoorthy, Ganesh; Wright, Arnold M.
• 署名单位: Boston College; Northeastern University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50585
• 发表日期: 2014
• 页码: 243-273
• 关键词: CORPORATE GOVERNANCE; earnings management; accounting restatements; nonaudit services; INTERNAL CONTROL; LITIGATION RISK; QUALITY; fees; specialization; association

摘要

Calls from practice suggest that audit committee members with industry expertise can improve audit committee effectiveness. Nevertheless, regulators and the extant literature have focused on the financial expertise of the audit committee. We posit that audit committee industry knowledge is valuable because accounting guidance, estimates, and oversight of the external auditor are often linked to a company's operations within a particular industry. Taking a holistic view, we examine two measures of financial reporting quality (financial restatements and discretionary accruals) and two measures of external auditor oversight (audit and nonaudit fees). As predicted, we find that audit committee members who are both accounting and industry experts perform better than those with only accounting expertise. We also find that in certain instances, supervisory experts who are also industry experts perform better than supervisory experts alone. Overall, these results suggest that industry expertise, when combined with accounting expertise, can improve the effectiveness of the audit committee in monitoring the financial reporting process.