The impact of audit committee expertise on auditor resources: the case of Israel

Omer Berkman and Shlomith D. Zuta ()
Additional contact information
Omer Berkman: The Academic College of Tel-Aviv Yaffo
Shlomith D. Zuta: The Academic College of Tel-Aviv Yaffo

Review of Quantitative Finance and Accounting, 2020, vol. 55, issue 2, No 6, 579-603

Abstract: Abstract We investigate the association between internal audit resources and both audit committee financial expertise and independence using hand-collected data on firms traded on the Tel Aviv Stock Exchange in 2010–2014. This period follows the full implementation of SOX (and a similar regulation in Israel), a law that increased the burden of responsibility of audit committee members. Since expertise allows for a better appreciation of the risks inherent in the firm’s operations and the appropriate audit scope, we believe that expert committee members are more likely to require additional audit hours. Thus, we expect and document a significant and positive association between internal audit resources and audit committee expertise. This relation contrasts with the findings in Barua et al. (J Acc Public Pol 29(5):503–513, 2010), a study conducted on data gathered in the midst of the implementation of SOX. However, we fail to find any significant association between internal audit resources and audit committee independence. Our paper is the first to use publicly available data on internal audit resources, based on mandatory disclosures that are required in Israel but not in the US. Our analysis is thus not subject to non-response and self-selection biases existing in previous studies using survey data. Moreover, our study uses the number of hours worked by internal audit, a more direct measure of internal audit effort than budget or number of employees.

Keywords: Audit committee; Internal audit; Audit committee independence; Audit committee financial expertise; Corporate governance; Board of directors (search for similar items in EconPapers)
JEL-codes: G34 G38 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11156-019-00853-0 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:55:y:2020:i:2:d:10.1007_s11156-019-00853-0

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-019-00853-0

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().