The Effect of Audit Committee Expertise on Monitoring Financial Reporting — The Harvard Law School Forum on Corp. Gov. and Fin. Reg.

Contrary to prior studies that do not report a significant association between supervisory expertise and financial reporting quality (Krishnan and Visvanathan 2008; Dhaliwal et al. 2010), we identify instances in which audit committee members with both industry and supervisory expertise are associated with higher financial reporting quality and more effective monitoring of the external auditor. Specifically, we find that they are associated with lower income-increasing discretionary accruals and lower non-audit fees as a proportion of total fees than members who are supervisory experts alone. Overall, our results suggest that in order to more effectively monitor the financial reporting process, it is beneficial for an audit committee member to have industry expertise in addition to accounting expertise.

via The Effect of Audit Committee Expertise on Monitoring Financial Reporting — The Harvard Law School Forum on Corp. Gov. and Fin. Reg.