Associations between the financial and industry expertise of audit committee members and key audit matters within related audit reports
Journal of Applied Accounting Research, 2019, vol. 21, issue 1, 185-200
Purpose - The purpose of this paper is to focus on audit committees’ financial and industry expertise (FIE) and their impact on the readability of key audit matters (KAMs). Design/methodology/approach - Based on an agency-theoretical framework, analyses are conducted of data from a sample of UK premium listed companies for the fiscal years 2014–2017 (i.e. 1,319 firm-year observations). Correlation and regression analyses are conducted to evaluate possible associations between FIE in audit committees and KAM readability. The author relies on popular readability measures (Flesch Reading Ease and Fog Index). Findings - Audit committees’ FIE and KAM readability are positively connected. Combined FIE also has a stronger effect than either financial or industry expertise alone. Research limitations/implications - Companies, regulators and researchers could be significantly affected by the finding that audit committees’ FIE can have a considerable impact on KAM readability. Originality/value - The analysis of the link between audit committees’ FIE and KAM readability makes a contribution to prior empirical research on KAM.
Keywords: Audit committees; External audit; Industry expertise; Financial expertise; Key audit matters; Auditor reporting; M410; M420 (search for similar items in EconPapers)
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