Contributors to audit committee effectiveness: An experimental study of external auditors’ perception

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Mohammad K. Shbeilat ORCID logo

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Effective audit committees are the best guarantee of sound corporate governance (Levitt, 1999). Thus, the investigation of factors affecting audit committee effectiveness (ACE) is the main objective of this study. Specifically, it evaluates the impact of audit committee independence, financial literacy, authority, and diligence on ACE. A mixed method approach is adopted consisting of a fully crossed, within-subjects design to test the main and interactive weights of the four variables and eight in-depth interviews. The analysis of 55 survey‐based factorial experiments reveals that financial literacy has the greatest effect on the external auditor’s decision to assess the effectiveness of audit committees followed by diligence, independence, and authority. Additionally, three significant interactions were found indicating that external auditors process decision-making information configurally, which means that external auditors consider the combined effects of the posited factors. The interviews provide constructive explanations of the effects of the four factors along with their interactive effects. The insights gained from this study are useful to the board of directors, professional bodies, and regulators charged with developing corporate governance seeking the optimal composition of audit committees. These results are vital because they reflect the viewpoint of the external auditors, who are the most communicative and interactive with the audit committees.

Keywords: Audit Committee Effectiveness, Corporate Governance, External Auditor, Mixed Method, Within-Subject Design

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: G30, M40, M48

Received: 30.01.2023
Accepted: 04.08.2023
Published online: 07.08.2023

How to cite this paper: Shbeilat, M. K. (2023). Contributors to audit committee effectiveness: An experimental study of external auditors’ perception [Special issue]. Corporate Governance and Organizational Behavior Review, 7(3), 291–306.