Article2019

Can Audit Committee Expertise Increase External Auditors' Litigation Risk? The Moderating Effect of Audit Committee Independence

40 citations0/0 files storedContemporary Accounting Research

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

ABSTRACT This study examines whether the perceived independence and financial expertise of audit committee members affect external auditors' exposure to legal liability. We use an experiment in which potential jurors make judgments about auditor independence and legal liability for a case involving an audit failure. We find that perceptions of audit committee independence from management are positively associated with judgments of auditor independence and negatively associated with auditor liability. However, financial expertise of audit committee members can be a double‐edged sword. Our experiment finds that judgments of auditor liability are higher when the audit committee is perceived to have higher financial expertise but lower independence from management. In assessing litigation risk of current and prospective clients, auditors may want to carefully consider the independence of audit committee members from management, particularly when audit committee members have financial expertise. In the event of an audit failure, the financial expertise of nonindependent audit committee members can negatively affect jurors' perceptions of auditor independence and liability.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 40 citations exist upstream.

References

2004The Persuasiveness of Source Credibility: A Critical Review of Five Decades' Evidence 2004The Effect of Audit Committee Expertise, Independence, and Activity on Aggressive Earnings Management 2005Audit Committee Quality and Internal Control: An Empirical Analysis 2006Audit Committee Quality, Auditor Independence, and Internal Control Weaknesses 2006Conflicts Of Interest And The Case Of Auditor Independence: Moral Seduction And Strategic Issue Cycling 2010The Association Between Accruals Quality and the Characteristics of Accounting Experts and Mix of Expertise on Audit Committees*2001The Effects of Corporate Governance Experience and Financial-Reporting and Audit Knowledge on Audit Committee Members' Judgments 2010Corporate Governance in the Post‐Sarbanes‐Oxley Era: Auditors’ Experiences*

Cited by

2021Audit committee members’ professional identities: Evidence from the field 2020The impact of audit committee financial expertise on de facto use of IFRS: does external auditor’s size matter?2024Are Audit Committees Overloaded? Evidence from the Effect of Financial Risk Management Oversight on Financial Reporting Quality 2023The impact of audit members' self-esteem and narcissism on organizational knowledge sharing among audit firms

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.