Associations between the financial and industry expertise of audit committee members and Key Audit Matters within related audit reports
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In: Journal of Applied Accounting Research, Vol. 21, No. 1, 10.02.2020, p. 185-200.
Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - Associations between the financial and industry expertise of audit committee members and Key Audit Matters within related audit reports
AU - Velte, Patrick
PY - 2020/2/10
Y1 - 2020/2/10
N2 - PurposeThe 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/approachBased 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).FindingsAudit committees’ FIE and KAM readability are positively connected. Combined FIE also has a stronger effect than either financial or industry expertise alone.Research limitations/implicationsCompanies, regulators and researchers could be significantly affected by the finding that audit committees’ FIE can have a considerable impact on KAM readability.Originality/valueThe analysis of the link between audit committees’ FIE and KAM readability makes a contribution to prior empirical research on KAM.
AB - PurposeThe 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/approachBased 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).FindingsAudit committees’ FIE and KAM readability are positively connected. Combined FIE also has a stronger effect than either financial or industry expertise alone.Research limitations/implicationsCompanies, regulators and researchers could be significantly affected by the finding that audit committees’ FIE can have a considerable impact on KAM readability.Originality/valueThe analysis of the link between audit committees’ FIE and KAM readability makes a contribution to prior empirical research on KAM.
KW - Management studies
KW - Audit committees
KW - External audit
KW - industry expertise
KW - financial expertise
KW - Key audit matters
KW - auditor reporting
KW - M410
KW - M420
UR - http://www.scopus.com/inward/record.url?scp=85073936076&partnerID=8YFLogxK
U2 - 10.1108/JAAR-10-2018-0163
DO - 10.1108/JAAR-10-2018-0163
M3 - Journal articles
VL - 21
SP - 185
EP - 200
JO - Journal of Applied Accounting Research
JF - Journal of Applied Accounting Research
SN - 0967-5426
IS - 1
ER -