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Does the audit committee member’s accounting experience associated with key audit matter types?

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Abstract

Using a narrow view of accounting experience, this study examines the relationship between accounting experience on audit committees (ACs) and key audit matters (KAMs) in the UK. In contrast to extant research, this study distinguishes between different types of accounting experience on AC and how this relates to different types of KAMs. We also address the effects of the interplay between accounting and supervisory experiences on KAMs. Using a sample from FTSE 350, we provide robust evidence that accounting experience on ACs is an important driver of extended audit reporting quality. Moreover, we find evidence that different types of accounting experience have mostly similar effects on different types of KAMs. Further, we show that AC members with prior supervisory experience complement the role of accounting experience. Nevertheless, this complementary relationship varies between types of KAMs. Overall, our study offers important insights regarding how accounting and supervisory experience on ACs is associated with the quality of KAMs reported in the extended reports. Our results are robust to alternative sampling, model specifications, and endogeneity concerns.

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Notes

  1. We follow Lee and Park (2019) and define an audit committee member as having accounting financial expertise if s/he currently serves or previously served in one of the following positions: chief financial officer, principal financial officer, financial executive, president of finance, chief accounting officer, principal accounting officer, accounting officer, certified public accountant, audit partner, controller, head of accounting, head of finance, VP of finance, VP of accounting, or chartered accountant. For the supervisory expertise, the chief executive officer, chief executive, group chief executive, principal executive officer, president, and group president are considered to provide supervision over financial statement preparation.

  2. Following Lee and Park (2019), we apply a caliper distance of 1% or 0.1%. The untabulated results reveal that the findings remain unchanged.

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Authors and Affiliations

  1. Zayed University, Dubai, UAE

    Ahmed Aboud & Amr Kotb

  2. Faculty of Commerce, Beni-Suef University, Beni Suef, Egypt

    Ahmed Aboud

  3. Bournemouth University Business School, Bournemouth, UK

    Hany Elbardan

  4. Faculty of Business, Alexandria University, Alexandria, Egypt

    Hany Elbardan

  5. American University in Cairo, New Cairo City, Egypt

    Moataz El-Helaly

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  1. Ahmed Aboud
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  2. Hany Elbardan
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  4. Amr Kotb
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Correspondence to Ahmed Aboud.

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Aboud, A., Elbardan, H., El-Helaly, M. et al. Does the audit committee member’s accounting experience associated with key audit matter types?. Rev Quant Finan Acc (2024). https://doi.org/10.1007/s11156-024-01276-2

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