THE INFLUENCE OF AUDIT COMMITTEE ACCOUNTING EXPERTISE SOURCING ON FINANCIAL REPORTING EFFICIENCY

Abstract

This study investigates the impact of varied expertise types on audit quality, offering valuable insights for corporate governance and enhancing the audit process. Utilizing 51 firm-year observations from 2021-2023, this research employs advanced statistical tests, including Breusch-Pagan LM, Pesaran Scaled LM, Bias-corrected Scaled LM, and Pesaran CSD test, to assess cross-sectional dependency. Second-generation panel unit root tests are applied to examine the stationarity of variables, followed by panel cointegration testing and long-run estimation modeling to analyze the relationships. The findings reveal that financial, accounting, and accounting expertise all positively and significantly impact audit quality, suggesting that audit committees with diverse expertise can effectively augment the audit process. A single causal relationship indicates that audit committee expertise enhances audit quality. This study highlights the importance of incorporating experts from diverse backgrounds on audit committees to improve audit quality and increase stakeholder trust in financial statements. Companies must prioritize expertise when appointing audit committee members to maintain high-quality audit reports. This research contributes to the existing literature on audit committee expertise and audit quality by examining the influence of accounting and non-accounting expertise types in the Bangladeshi context and providing empirical evidence supporting agency theory