Does the SOX Definition of an Accounting Expert Matter?
The Association Between Audit Committee Directors Accounting Expertise and Accounting Conservatism”, by G. V. Krishnan and G. Visvanathan, Contemporary Accounting Research, In Press. This paper investigates whether having non-accounting experts (versus accounting experts) serving on the audit committee affects the quality of financial reporting. The authors use a sample of S&P 500 firms to examine whether the committee’s financial expertise is associated with accounting conservatism, a fundamental characteristic of financial reporting. The results suggest that an audit committee’s financial expertise is positively associated with conservatism when financial expertise is defined to include only accounting experts. However, the results are conditional upon the firm’s overall corporate governance. For weak boards, accounting financial expertise is ineffective in promoting conservative accounting.
