Industry expertise on audit committee and audit report timeliness

Abstract

Motivated mainly by streams of research that suggest industry expertise of audit committee (AC) is the best-qualification for directors, and that evidence on the value of this expertise is limited. This study examines whether AC financial expertise is associated with audit report timeliness and mainly explores the effect of AC industry expertise on audit report timeliness by supporting AC financial expertise. The study used a sample from a unique setting and pooled regression analysis, and the study reveals that AC financial expertise is not associated with reducing audit report delay. More significantly, it documents that a reduction delay in audit reporting, improving audit timeliness, is more apparent when the members’ industry expertise level enhances AC’s financial expertise members. This study also records that AC members with financial expertise and industry expertise are strongly associated with decreasing the audit report delay. Financial expertise is associated with a shorter audit report delay in the subgroup of industry expertise. Overall, this study highlights the added value of industry expertise with financial expertise in improving audit committees’ effectiveness in the context of timely reporting.

Keywords

• audit committee
• industry expertise
• financial expertise
• audit report timeliness
• audit risk and effort