Implications of directors’ education for audit fees: does the audit committee matter?

Abstract

Purpose Building upon multiple theories (i.e. agency, signalling and human capital), this paper aims to explore the effects of directors’ education on audit fees and to assess the mediating role of audit committee (AC). Design/methodology/approach The authors use an econometric analysis of Italian-listed non-financial firms during the period 2012–2015 using single-mediator models through ordinary least squares and logit regressions. Moreover, the authors apply the path analysis with the bootstrap method to test the mediating effect. Findings Findings show that the directors’ level of education improves audit fees. Additionally, the presence of an AC and the financial expertise of its members mediate this relationship. Practical implications By offering insights into the implications for audit pricing of the board and AC human capital, the paper helps regulators and policy-makers to understand which characteristic of such governance bodies improves auditing quality and the provision of better financial reporting. Originality/value The study uses a unique data set hand-collected from multiple sources and advances the auditing literature by shedding light on the reasons behind the influence of directors’ characteristics on audit fees and on the role played by the AC.

Does Female Audit Committees Improve Audit Quality?

“…The first model test shows that the educational level variable is not proven to influence audit quality significantly. Theoretically, the higher the level of education, the higher the intelligence and knowledge to conduct the role of monitoring financial reporting [10]. However, the results do not support this.…”

“…The implementation of education has several stages or levels that are adjusted to students' development level. Therefore, a person's level of formal education will shape the cognitive characteristics that determine a person's ability and way of thinking in decision-making [10]. The education level influences audit committee members' knowledge and intelligence abilities.…”

Cultural Influence on Corporate Sustainability: A Board of Directors Perspective

“…Finally, the last element is legitimation strategies. In this element, the board directors commit to developing strategies to demonstrate alignment between the firm and the values and norms institutionalized in the sector (Saggese et al 2023). This condition may go hand in hand with the need to adapt to the pressures of the environment and share values with institutional pressures.…”