Audit committee expertise in large European firms

Abstract

Purpose – This paper aims to study how audit committee member expertise is related to certain features of the committee and to the audit process. Design/methodology/approach – Based on information from 2,477 directors from 296 firms in eight European countries between 2005 and 2014, this study measures average audit committee expertise using a continuous variable, which combines education-based and experience-based expertise. Different measures of the audit process are then regressed against this and other control variables. Findings – Average committee expertise has increased in recent years. Education-based and experiencebased expertise seem to be complementary. Results also show that committees with greater expertise meet more frequently, have fewer directors with full-time dedication and pay lower audit fees. There is no link to changes in the external firm audit, which may be due to mandatory auditor rotation. Originality/value – The paper provides a comprehensive metric of audit committee expertise that includes directors’ academic background, professional experience and qualifications. In addition, this study expands current knowledge concerning whether and how committee expertise affects the audit process