The Association Between Accruals Quality and the Characteristics of Accounting Experts and Mix of Expertise on Audit Committees *

The Association Between Accruals Quality and the Characteristics of Accounting Experts and Mix of... 1. Introduction An important dimension of audit committee (AC) effectiveness that has gained the attention of regulators and academics is the financial expertise of AC members ( General Accounting Office 1991 ; Public Oversight Board 1993 ; Kalbers and Fogarty 1993 ; DeZoort 1997, 1998 ; Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees 1999 ; DeZoort, Hermanson, Archambeault, and Reed 2002 ; Sarbanes‐Oxley Act of 2002 [SOX] 2002 ; Cohen, Krishnamoorthy, and Wright 2004 ). Section 407 of SOX requires the Securities and Exchange Commission (SEC) to adopt rules mandating that the AC of public firms include at least one member who is a financial expert or disclose reasons for not adopting this requirement. While SOX proposes a narrow definition of financial expertise, to include individuals with experience in accounting or auditing, the SEC controversially adopted a broader definition of financial expertise that includes accounting and certain types of nonaccounting (finance and supervisory) financial expertise. The controversy surrounding the definition of what constitutes a financial expert has given rise to an avenue of academic research on the effects of accounting and nonaccounting financial expertise in ACs on financial reporting quality (e.g., Carcello, Hollingsworth, Klein, http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Contemporary Accounting Research Wiley

The Association Between Accruals Quality and the Characteristics of Accounting Experts and Mix of Expertise on Audit Committees *

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Publisher
Wiley
Copyright
© 2010 The Canadian Academic Accounting Association
ISSN
0823-9150
eISSN
1911-3846
D.O.I.
10.1111/j.1911-3846.2010.01027.x
Publisher site
See Article on Publisher Site

Abstract

1. Introduction An important dimension of audit committee (AC) effectiveness that has gained the attention of regulators and academics is the financial expertise of AC members ( General Accounting Office 1991 ; Public Oversight Board 1993 ; Kalbers and Fogarty 1993 ; DeZoort 1997, 1998 ; Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees 1999 ; DeZoort, Hermanson, Archambeault, and Reed 2002 ; Sarbanes‐Oxley Act of 2002 [SOX] 2002 ; Cohen, Krishnamoorthy, and Wright 2004 ). Section 407 of SOX requires the Securities and Exchange Commission (SEC) to adopt rules mandating that the AC of public firms include at least one member who is a financial expert or disclose reasons for not adopting this requirement. While SOX proposes a narrow definition of financial expertise, to include individuals with experience in accounting or auditing, the SEC controversially adopted a broader definition of financial expertise that includes accounting and certain types of nonaccounting (finance and supervisory) financial expertise. The controversy surrounding the definition of what constitutes a financial expert has given rise to an avenue of academic research on the effects of accounting and nonaccounting financial expertise in ACs on financial reporting quality (e.g., Carcello, Hollingsworth, Klein,

Journal

Contemporary Accounting ResearchWiley

Published: Sep 1, 2010

References

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