Researchers at the University of Tasmania are investigating whether appointing a chairperson with particular characteristics, such gender, qualifications, or industry experience, can affect the monitoring role of audit committees.
“We want to test, for example, whether having a female chair makes a difference in terms of increasing the monitoring role of the audit committee,” said researcher and senior lecturer Dr Masoud Azizkhani from the Tasmanian School of Business and Economics.
“We’re also looking at other characteristics, such as, does having expertise in accounting matter? What about the length of their tenure with the board, or having previous industry experience?”
Thought to be the first such project carried out at committee chair level, Dr Azizkhani’s research is part of a collaboration with researchers from the University of New South Wales (UNSW).
The study is expected to be completed by the end of 2018, but early results suggest that some of these factors really can make a difference.
In publicly listed companies, audit committees are made up of at least three members. The audit committee appoints, compensates, and oversees the work and independence of the external auditor. They also review the financial reports, provide oversight of internal controls and the risk management process, and pre-approve all auditing and non-auditing services.
The chair of the audit committee plays an important role in ensuring the quality of financial reports through working with audit committee members; setting the committee agenda; and liaising with external auditors, the board of directors, management, and internal auditors.
They are also involved in the selection of audit committee members in conjunction with the board.
Early results of Dr Azizkhani’s research suggest that financial monitoring is likely to be more thorough when the chair has accounting expertise, or receives higher remuneration from the company. And gender also appears to play a role.
So far, based on the very early results, I feel like we have a story to tell. Gender does make a difference.
“We found that having a female chair is associated higher audit fees, and appointing a higher quality auditor.”
The study comes at a time when the issue of gender diversity on boards in Australia is at the forefront of discussions.
“Females are not fairly represented on boards,” said Dr Azizkhani. “There is a requirement in Norway that corporate boards to have at least 40 per cent female directors. In Australia, we don’t have that in the corporate sector, but in the public sector, there are requirements for gender diversity.”
As well as looking at the effects associated with a chairperson’s characteristics, Dr Azizkhani also plans on examining whether the ratio of women to men on a committee can affect the results.
Gender research is being done in all fields, but it’s a less-researched area in accounting.
“This research may show that having a gender-diversified board could improve its effectiveness,” he said. “It’s not about bias, it’s about reality.”
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About Dr Masoud Azizkhani
Dr Azizkhani, researcher and a senior lecturer at the Tasmanian School of Business and Economics, has studied client/auditor relationships for more than a decade, beginning with his PhD in the early 2000s.View Dr Masoud Azizkhani's full researcher profile