The Effects of Corporate Governance Experience and Financial-Reporting and Audit Knowledge on Audit Committee Members' Judgments

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Abstract
Interest in audit committees as part of overall corporate governance has increased dramatically in recent years, with a specific emphasis on member independence, experience, and knowledge. This paper reports the results of a study investigating whether audit committee members' corporate governance experience and financial‐reporting and audit knowledge affect their judgments in auditor‐corporate management conflict situations. A sample of 68 audit committee members completed an accounting policy dispute case and several knowledge and ability tests. The results indicate that, as expected, greater independent director experience and greater audit knowledge was associated with higher audit committee member support for an auditor who advocated a “substance over form” approach in the dispute with client management. Conversely, concurrent experience as a board director and a senior member of management was associated with increased support for management. Collectively, these findings have a number of implication...