An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Dan S. Dhaliwal
University of Arizona

Vic Naiker
University of Auckland

Farshid Navissi
Monash University

Farshid Navissi
Monash University

Abstract: Following the enactment of Sarbanes Oxley Act of 2002, stock exchanges advocated the presence of financial experts on audit committees. The ideal definition of financial expertise proved to be controversial culminating with the stock exchanges adopting broad scoped definitions of financial expertise. Prior studies employing the broad definition of financial expertise have not provided conclusive evidence of financial expertise positively influencing the effectiveness of audit committees in monitoring the financial reporting process. The findings suggest that the current definition of financial expertise is too broad and encompasses skills that do not contribute to audit committee effectiveness. We investigate the association between three specific types of audit committee financial expertise (accounting, finance and supervisory expertise) and accruals quality and show a significant positive relation only between accounting expertise and accruals quality.

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