Audit Committees’ influence on External Audit Quality and Auditor Independence: an analysis of listed Swedish firms’ committee effectiveness.
Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesis
Purpose – The aim of this study is to investigate implications of a set of audit committee characteristics related to the organ’s composition and activities on committee effectiveness in terms of external audit quality and external auditor independence.
Research Design - The study is conducted using two multiple regression models within which external audit quality and external auditor independence are the dependent variables. These measures of committee effectiveness are approximated via audit fees and non-audit service fees paid by a sample of 147 companies listed on the Stockholm Stock Exchange. The data is drawn from the companies’ annual reports for the 2014 financial year. Based on the findings within the literature, a set of hypotheses are formulated which are tested through the use of these models.
Findings - The results indicate that committee members who are independent of major shareholders facilitate higher audit committee effectiveness overall, and that committee experience within accounting and finance facilitates higher external audit quality. However, we fail to find a significant correlation between committee effectiveness and other characteristics related to committees’ levels of expertise and diligence as monitors of statutory auditors.
Contribution – The findings support the notion that audit committee characteristics affect audit quality positively, and to a lesser extent, auditor independence. In particular, there is an indication that committees’ independence of major shareholders is of particular importance in determining effectiveness in these matters – an attribute which has not been covered prior to this study.
Value – The results highlight the importance of audit committees’ composition in affecting the interaction between the organ and the statutory auditor. This data could be of use to Swedish regulators in staking out future developments within the field. The results could provide shareholders with a guiding hand in their selection of board members: highlighting which characteristics are beneficial in facilitating committee effectiveness – and hence a more effective audit process. This could help shareholders in enhancing the reliability of financial information on the stock market, in turn increasing the efficiency of the markets themselves.
Place, publisher, year, edition, pages
2016. , 53 p.
Audit Committee Effectiveness External Audit Sweden Composition
IdentifiersURN: urn:nbn:se:hj:diva-30110ISRN: JU-IHH-FÖA-2-20160182OAI: oai:DiVA.org:hj-30110DiVA: diva2:932214
Subject / course
IHH, Business Administration
Inwinkl, Petra, Dr. Dr.