Audit committee chair and financial reporting timeliness: A focus on financial, experiential and monitoring expertise

Abstract

In this study, we examine the association of audit committee chair financial, experiential and monitoring expertise with the audit report lag period. We find that the experiential and monitoring expertise of audit committee chairs have a significant negative association with the delay in the audit report lag period, possibly resulting in more effective audit committee chairs, at least in the face of financial reporting timeliness. We also find that the audit committee composite compliance variable has a significant negative association with the audit report lag period, which suggests that a firm's compliance with audit committee regulations is also beneficial for financial reporting timeliness. These are important findings from the practice, academic and public policy perspectives.

The audit committee chair's abilities: Beyond financial expertise

“…Most of the recent academic research regarding the characteristics of the audit committee has drawn on secondary data and looked at the impact that different audit committee characteristics have on various outcomes (Gendron & Bédard, 2006;Gendron, Bédard, & Gosselin, 2004;Ghafran & O'Sullivan, 2013;Ghafran & Yasmin, 2018).…”

“…However, despite this important role, there is limited research on the audit committee chair's role and abilities, with the exception of the following few studies. Ghafran and Yasmin (2018) defined the chair as the focal point (leader) of the audit committee, who plays the main role in overseeing the financial reporting and who is therefore ultimately responsible for the audit committee's effectiveness. Based on a sample of 987 observations, Ghafran and Yasmin (2018) investigated the impact of the audit committee chair's characteristics (such as financial expertise, tenure, and experience sitting on other committees) on the audit report lag period.…”

“…The distinctive role of the chair is important, since the chair is considered to be the leader of the committee (Ghafran & Yasmin, ) mostly due to the chair's role in managing multiple relationships outside of the formal audit committee meetings (Bédard & Gendron, ; Fontaine, Khemakhem, & Herda, ). Despite the importance of the chair's role, prior research did not investigate the necessary abilities to fulfill this role (Bédard & Gendron, ; Fontaine et al, ; Ghafran & Yasmin, ). The motivation for our study is to fill this gap.…”

“…Even though the business community has stressed the importance of the audit committee chair's role, most of the academic studies have not distinguished this role from the role of the other audit committee members (Badolato, Donelson, & Ege, 2014;Ghafran & O'Sullivan, 2013;He & Yang, 2014;Sultana, Singh, & Mitchell Van der Zahn, 2015;Wu, Hsu, & Haslam, 2016). Research is, however, starting to recognize the influence of the audit committee chair's role and characteristics on the overall audit committee's role (Ghafran & Yasmin, 2018).…”

“…2 CPAB is similar to the Public Company Accounting Oversight Board in the USA, overseeing the audits of publicly listed companies in Canada. 2016; Ghafran & Yasmin, 2018). The motivation for our study is to fill this gap.…”