Research On The Relationship Between Financial Experts In Audit Committee And The Quality Of Financial Reports

The professional competence of audit committee is an important aspect to ensure the effective performance of the audit committee.The audit committee with financial knowledge and experience can better supervise and manage the management and improve the quality of financial reports.However,there are ambiguities and divergences in the definition of financial experts in audit committees by regulators in different countries.In 2018,the newly revised China's Code of Corporate Governance for Listed Companies explicitly requires that the convener of the audit committee should be an accountant(with a senior accountant title or a certified public accountant qualification).While the US Securities and Exchange Commission defined financial experts,included accounting and non-accounting financial experts in 2003.Based on the literature review,we found that most experts at home and abroad generally believe that the audit committee accounting financial experts and the quality of financial reports are significantly positively correlated,but there is no consensus on the effectiveness of non-accounting financial experts.In addition,there are relatively few studies on non-accounting financial experts in China,and such financial experts are common in audit committee of listed companies.Therefore,it is necessary to study the effectiveness of these two financial experts,especially the relationship between non-accounting financial experts and the quality of financial reports.Using the data of Shenzhen Main Board Company from 2012 to 2017,and following the rules of SEC,this paper divides the audit committee financial experts into accounting and non-accounting financial experts.This paper focuses on the impact of these two financial experts on the quality of financial reports,and finds that the accounting and non-accounting financial experts can significantly improve the quality of financial reports.This paper further classifies the non-accounting financial experts into supervisory and financial experts,and finds that only supervisory financial experts are positively correlated with the quality of financial reports,while financial experts can not significantly improve the quality of financial reports,and may even damage the quality of financial reports.The empirical results show that we need not only accounting financial experts,but also non-accounting financial experts with indirect financial knowledge,especially supervisory financial experts.This paper provides empirical evidence for optimizing the structure of audit committees and provides new enlightenment for regulators and corporate governance of listed companies.