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

This study considers how the agency role of accounting experts is influenced by the resource dependence focus of nonaccounting (finance and supervisory) financial experts in audit committees. Using post-Sarbanes-Oxley data, the results suggest that the business and industry knowledge possessed by finance experts can complement the domain-specific knowledge of accounting experts to promote financial reporting quality. We also find, however, that supervisory experts are unable to constructively apply their business acumen in complementing accounting or finance experts in audit committees. Additionally, this study assumes a deeper view of the agency role of accounting experts to assess how the other personal characteristics of accounting experts influence their contributions toward audit committee effectiveness. The results from these tests indicate a positive relationship between accruals quality and audit committee accounting experts who are independent, hold fewer multiple directorships, and have lower tenure in their firms. While our results remain robust after controlling for endogeneity, we also show that accounting experts prefer directorships in firms with higher accruals quality. Overall, our findings highlight the contextual nature of accounting expertise in overseeing the quality of financial reporting.