Business, Management and Accounting
3 years ago

Audit Committee Expertise Increases Auditor Liability Risk for Non-Independent Committees

2 views
SSRN Electronic Journal
Can Audit Committee Financial Expertise Increase External Auditors’ Litigation Risk? The Moderating Effect of Audit Committee Independence
Jillian Alderman, S. Jane Jollineau

Paper Summary

The study looked at how the independence and financial expertise of audit committee members affect external auditors' legal liability. They found that when audit committees are seen as independent from management, auditors are viewed as more independent and face less liability. However, if audit committee members have high financial expertise but low independence, auditors face higher liability. This means auditors should consider the independence of audit committee members, especially when they have financial expertise, to assess the risk of legal action in case of audit failures.

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