Document Type : Research Paper


Assistant Professor, Accounting Dep, Farabi Colleges, University of Tehran, Qom, Iran.


The purpose of this study is to examine the relationship between financial expertise and the experience of the audit committee chairman with auditor selection, audit fees, and audit quality. To achieve the research goal, a sample equal to 99 companies listed on the Tehran Stock Exchange during the period from 2015 to 2023, equivalent to 792 company-years, was analyzed using multiple regression analysis based on combined data. The findings showed that the companies whose heads of the audit committee possess financial expertise are more likely to choose the Audit Organization or audit institutions with quality control ‘A’ as their independent auditors. Also, according to the findings, the financial expertise of audit committee heads leads to an increase in audit fees and audit quality. However, this study did not identify a significant relationship between the audit committee chairman's experience with auditor selection and audit fees, but a positive and significant relationship between the audit committee chairman's experience and audit quality was identified. The findings of this study contribute to the literature by documenting that financial expertise and experience of audit committee heads are important for improving the audit process and audit quality.
­1. Introduction
In recent years, the significant impact of the audit committee on the effectiveness of the audit process has been confirmed by various researchers (Azizkhani et al., 2023). The chairman of the audit committee is considered the chief executive officer of the audit committee (Ernst & Young, 2013). It is necessary for the chairman of the audit committee, as a leader, to understand the culture of the organization, set clear expectations for the committee members, and consider both management and auditors in their decisions. The chairman of the audit committee, who is more responsible than other members of the committee, plays a vital role in controlling financial reporting and evaluating the effectiveness of the audit committee (Bromilo & Keeler, 2011). The chairman of the audit committee plays a key role in ensuring the quality of financial reports through cooperation with the members of the audit committee, setting the agenda of the committee, communicating with the board of directors, management, and independent auditors, and helping to select the members of the audit committee (Azizkhani et al., 2023). In Iran, the audit committee is one of the basic committees of a company. In 2013, the Securities and Exchange Organization required all listed companies to form an audit committee. This committee is responsible for supervising the work of internal and independent auditors, proposing independent auditors to the general meeting of shareholders for the purpose of appointing, determining the fees, and dismissing independent auditors, reviewing the frequency of audits, receiving audit reports, and ensuring that corrective actions are taken in a timely and correct manner. It is the responsibility of management to address weaknesses and shortcomings, non-compliance with policies, laws, and regulations, and resolve other problems identified by the auditors (Nazari et al., 2019).


The present research is a descriptive, correlational study in terms of its applied purpose and the relationship between variables. The data and information used are historical and post-event. The statistical population of this research includes all the companies listed on the Tehran Stock Exchange. The statistical sample of the research comprises all the companies that were active in the stock market from the beginning of 2015 to the end of 2023 and meet the following conditions: 1. Their membership in the Tehran Stock Exchange must have continued throughout the research period. 2. The data needed for the research must have been available to them during the research period. 3. They must not belong to investment, financial mediation, holding, bank, or leasing companies. 4. The end of the financial year for these companies should not have changed during the research period and must coincide with the end of March. Finally, after applying the above conditions, 99 companies (equivalent to 792 company-years) were selected as the statistical sample. To collect the data, the database of Rahavard Novin and the reports published on Codal were used. Research hypotheses were tested based on combined data and using multivariate regression models.


In this study, the effect of financial expertise and the experience of the head of the audit committee on auditor selection, audit fees, and audit quality was investigated. The findings indicate that the heads of the audit committee who possess accounting and financial expertise are more likely to choose a first-rate auditor (The Audit Organization or audit institutions with a quality rating of ‘A’) as an independent auditor. Additionally, audit committee heads with accounting and financial expertise tend to pay higher audit fees and enhance audit quality. These findings are consistent with the results of studies by Azizkhani et al. (2023), Lari Dasht Beyaz et al. (2017), and Ghafaran and Yasman (2018). Therefore, the accounting and financial expertise of the head of the audit committee, as an important and influential factor in the audit process, should receive attention from supervisory and legislative institutions. Due to its significance, it should become a legal requirement for companies listed on the Tehran Stock Exchange.


Although the accounting and financial expertise of the head of the audit committee was identified as an influencing factor in the selection of the auditor and the audit fee, the results of this study showed that the greater experience of the heads of the audit committee does not lead to the selection of a first-class independent auditor and does not significantly affect the audit fee. This finding is not compatible with the results of the studies by Elsayani et al. (2023) and Lari Dasht Beyaz et al. (2017). However, the findings indicate that the greater experience of the heads of the audit committee increases the quality of the audit, which is consistent with the findings of the study by Azizkhani et al (2023). These results indicate that the accounting and financial expertise of the head of the audit committee, as an internationally proven factor, demonstrates the expected performance in companies listed on the Tehran Stock Exchange. However, the experience of the head of the audit committee is not as effective as accounting and financial expertise. In this regard, it may be possible to attribute the weak role of audit committee heads in the selection of auditors and audit fees in our country as a reason for this lack of influence. It is expected that with the passage of time and future legal and regulatory reforms, audit committees will become more efficient and effective, and their heads will play a greater role in improving the audit process.


Main Subjects

  1. Abernathy, J.L., Beyer, B., Masli, A., & Stefaniak, C. (2014). The association between characteristics of audit committee accounting experts, audit committee chairs, and financial reporting timeliness. Advances in Accounting, 30(2), 283-297.‌/j.adiac.2014.09.001
  2. Archambeault, D.S., DeZoort, F.T., & Holt, T.P. (2008). The need for an internal auditor report to external stakeholders to improve governance transparency. Accounting Horizons, 22(4), 375-388.
  3. Alzoubi, E. (2017). Audit Quality, Debt Financing, and Earnings Management: Evidence from Jorden. Journal of International Accounting, 17(2), 170-189.‌j.intaccaudtax.‌2017.12.‌001
  4. Audit Committee Leader Network (ACLN) in North America. (2011). Addressing audit committee workload. Viewpoints, 36(3), 1-10.
  5. Auditing and Assurance Standards Board [AUASB]. (2017). Audit committees: a guide to good practice, A joint publication from the Auditing and Assurance Standards Board, Australian Institute of Company Directors and The Institute of Internal Auditors-Australia. Agenda Item 6.1 (3rd Edition).
  6. Azizkhani, M., Hossain, S., & Nguyen, M. (2023). Effects of audit committee chair characteristics on auditor choice, audit fee and audit quality. Accounting and Finance, 63(3), 3675-3707.
  7. Baumann, M.F. & Ratzinger-Sakel, N.V. (2020). The time dependence of audit firm alumni effects: evidence from audit committees. International Journal of Auditing, 24(1), 110-130.
  8. Bronson, S.N., Ghosh, A., & Hogan, C.E. (2017). Audit fee differential, audit effort, and litigation risk: an examination of ADR firms. Contemporary Accounting Research, 34(1), 83-117.
  9. Beasley, M.S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. The Accounting Review, 71(4), 443-465.‌stable/‌248566
  10. Bédard, J., Chtourou, S.M., & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: A Journal of Practice and Theory, 23(2), 13-35.
  11. Bromilow, C., & Keller, D. (2011). Audit committee effectiveness: what works best, 4th edition. Altamonte Springs, FL: The Institute of Internal Auditors Research Foundation.
  12. Chan, A.M.Y., Liu, G., & Sun, J. (2013). Independent audit committee members' board tenure and audit fees. Accounting and Finance, 53(4), 1129-1147.
  13. Choi, J.H., Kim, J.B., Liu, X., & Simunic, D.A. (2008(. Audit pricing, legal liability regimes, big 4 premiums. Contemporary Accounting, 25(1), 55-99.
  14. Dechow, P.M., Sloan, R.G., & Sweeney, A.P. (1995). Detecting earnings management. The Accounting Review, 70(2), 193-225.
  15. DeFond, M., & Zhang, J. (2014). A review of archival auditing research. Journal of Accounting and Economics, 58(2-3), 275-326.
  16. DeZoort, F. (1997). An investigation of audit committees' oversight responsibilities. Abacus, 33(2), 208-227.
  17. Ernst and Young [E&Y]. (2011). Insights for North American audit committee members, (January).
  18. Fama, E.F., & Jensen, M.C. (1983). Agency problems and residual claims. The Journal of Law and Economics, 26(2), 327-349.
  19. Farber, D.B., Huang, S.X., & Mauldin, E. (2018). Audit committee accounting expertise, analyst following, and market liquidity. Journal of Accounting, Auditing and Finance, 33(2), 174-199.
  20. Free, C., Trotman, A.J., & Trotman, K.T. (2021). How audit committee chairs address information-processing. The Accounting Review, 96, 147-169.
  22. Ghafran, C., & Yasmin, S. (2018). Audit committee chair and financial reporting timeliness: a focus on financial, experiential and monitoring expertise. International Journal of Auditing, 22(1), 13–24.
  24. Khemakhem, H., & Fontaine, R. (2019). The audit committee chair's abilities: beyond expertise. International Journal of Auditing, 23(3), 457–471.
  26. Kim, H., Kwak, B., Lim, Y., & Yu, J. (2017). Audit committee accounting expertise, CEO power, and audit pricing. Asia-Pacific Journal of Accounting and Economics, 24(3-4), 421-439.‌16081625.2015.1105753
  27. Lipman, F.D. (2004). Six common mistakes of audit committees. Directors and Boards -American Edition, 28(4), 30-32.
  28. Lai, K.M., Srinidhi, B., Gul, F.A., & Tsui, J.S. (2017). Board gender diversity, auditor fees, and auditor choice. Contemporary Accounting Research, 34(3), 1681-1714.
  29. Myers, L., Schmardebeck, R., & Slavov, S. (2021). Audit committee chair succession and financial reporting quality: does firm-specific knowledge matter? Working paper.
  30. PricewaterhouseCoopers (PwC). (2020). Audit committee effectiveness: practical tips for the chair.
  31. Palmrose, Z. V. (1986). An analysis of auditor litigation and audit service quality. Accounting Review, 63, 55-73.‌/stable/247679
  32. Sharma, V.D., & Iselin, E.R. (2012). The association between audit committee multiple-directorships, tenure, and financial misstatements. Auditing: A Journal of Practice and Theory, 31(3), 149-175.
  33. Sultana, N., Singh, H., & Rahman, A. (2019) Experience of audit committee members and audit quality. European Accounting Review, 28(5), 1-29.
  34. Ward, R.D. (2009). Audit committee leaders face increasing workload. Financial Executive, 25(2), 28-32.
  35. Zalata, A.M., Tauringana, V., & Tingbani, I. (2018). Audit committee financial expertise, gender, and earnings management: does gender of the financial expert matter? International Review of Financial Analysis, 55, 170-183.
  36. Jamei, R., Rostamian, A. (2015). The effect of financial expertise of audit committee members on the characteristics of expected profit. Financial accounting and auditing research, 8(29), 1-17. 20.1001.1.23830379.1395. [In Persian]
  37. Joudi, S., & Mansourfar, G. (2020). The role of audit quality on the relationship between information asymmetry and both informative and deceptive dimensions of income smoothing. Financial Accounting Research12(1), 19-38. doi: 10.22108/far.2020.118604.1499 [In Persian]
  38. Lari Dasht Beyaz, M., Ghanad, M., Fakur, H. (2017). Characteristics of audit committee and delay in audit report. Financial accounting and auditing research, 10(37), 215-241. 20.1001.1.23830379.1397. [In Persian]
  39. Namazi, M., Saidi, M. (2013). The relationship between board characteristics and auditor selection. Financial accounting and audit research. 6(22), 1-28. 20.1001.1.23830379.1393. [In Persian]
  40. Nazari, H., Soukhakyan, I., & Tahriri, A. (2020). Characteristics of the Chairman of Audit Committee and Timely Financial Reporting. Journal of Accounting Knowledge11(3), 131-165. doi: 10.22103/jak.2020.14872.3110 [In Persian]
  41. Salehi, M., Rahnema, M., & Abdolla Nezhad, R. (2020). Investigating The Impact of Audit Committee Chair Characters on the Relationship between Delay in Financial Reporting and Value Relevance. Accounting and Auditing Research12(48), 107-120. doi: 10.22034/iaar.2020.128198 [In Persian]
  42. Tahriri, A., & Afsay, A. (2021). The Impact of Environmental, Social and Governance Disclosure on Auditor Effort and Audit Quality. Journal of Accounting Knowledge12(3), 69-88. doi: 10.22103/jak.2021.‌16637.3349 [In Persian]