Audit Committee Financial Experts: Leveraging Their Information Advantage in Accounting, Auditing, and Corporate Governance

To enhance financial reporting quality through increased oversight, the Sarbanes–Oxley Act (SOX) Section 407 mandates that firms disclose whether their audit committee includes a financial expert or explains the absence of such an expert. The definition of a financial expert has been broadened to en...

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Main Authors: Zachery (Ziqi) Ma, Linna Shi, Katherine (Kexin) Yu, Nan Zhou
Format: Article
Language:English
Published: MDPI AG 2025-04-01
Series:Encyclopedia
Subjects:
Online Access:https://www.mdpi.com/2673-8392/5/2/55
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author Zachery (Ziqi) Ma
Linna Shi
Katherine (Kexin) Yu
Nan Zhou
author_facet Zachery (Ziqi) Ma
Linna Shi
Katherine (Kexin) Yu
Nan Zhou
author_sort Zachery (Ziqi) Ma
collection DOAJ
description To enhance financial reporting quality through increased oversight, the Sarbanes–Oxley Act (SOX) Section 407 mandates that firms disclose whether their audit committee includes a financial expert or explains the absence of such an expert. The definition of a financial expert has been broadened to encompass not only accounting knowledge but also finance or supervisory experience. Financial experts on audit committees possess an advantage in information access due to their role on the committee and an advantage in information processing because of their superior skills. This combination of skills and access to private information enables audit committee financial experts to achieve superior performance. We review articles that show audit committee financial experts leveraging their information advantage in accounting to improve financial transparency, in auditing to maintain audit integrity, and in corporate governance to enhance monitoring effectiveness.
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spelling doaj-art-58bdba2e853d4e1eb3a7a7ee41b66da12025-08-20T03:24:35ZengMDPI AGEncyclopedia2673-83922025-04-01525510.3390/encyclopedia5020055Audit Committee Financial Experts: Leveraging Their Information Advantage in Accounting, Auditing, and Corporate GovernanceZachery (Ziqi) Ma0Linna Shi1Katherine (Kexin) Yu2Nan Zhou3Department of Accounting, Lindner College of Business, University of Cincinnati, 2906 Woodside Drive, Cincinnati, OH 45221, USADepartment of Accounting, Lindner College of Business, University of Cincinnati, 2906 Woodside Drive, Cincinnati, OH 45221, USADepartment of Accountancy, Lumpkin College of Business and Technology, Eastern Illinois University, 600 Lincoln Avenue, Charleston, IL 61920, USADepartment of Accounting, Lindner College of Business, University of Cincinnati, 2906 Woodside Drive, Cincinnati, OH 45221, USATo enhance financial reporting quality through increased oversight, the Sarbanes–Oxley Act (SOX) Section 407 mandates that firms disclose whether their audit committee includes a financial expert or explains the absence of such an expert. The definition of a financial expert has been broadened to encompass not only accounting knowledge but also finance or supervisory experience. Financial experts on audit committees possess an advantage in information access due to their role on the committee and an advantage in information processing because of their superior skills. This combination of skills and access to private information enables audit committee financial experts to achieve superior performance. We review articles that show audit committee financial experts leveraging their information advantage in accounting to improve financial transparency, in auditing to maintain audit integrity, and in corporate governance to enhance monitoring effectiveness.https://www.mdpi.com/2673-8392/5/2/55audit committee financial expertiseSarbanes–Oxley Act (SOX) Section 407accountingauditingcorporate governance
spellingShingle Zachery (Ziqi) Ma
Linna Shi
Katherine (Kexin) Yu
Nan Zhou
Audit Committee Financial Experts: Leveraging Their Information Advantage in Accounting, Auditing, and Corporate Governance
Encyclopedia
audit committee financial expertise
Sarbanes–Oxley Act (SOX) Section 407
accounting
auditing
corporate governance
title Audit Committee Financial Experts: Leveraging Their Information Advantage in Accounting, Auditing, and Corporate Governance
title_full Audit Committee Financial Experts: Leveraging Their Information Advantage in Accounting, Auditing, and Corporate Governance
title_fullStr Audit Committee Financial Experts: Leveraging Their Information Advantage in Accounting, Auditing, and Corporate Governance
title_full_unstemmed Audit Committee Financial Experts: Leveraging Their Information Advantage in Accounting, Auditing, and Corporate Governance
title_short Audit Committee Financial Experts: Leveraging Their Information Advantage in Accounting, Auditing, and Corporate Governance
title_sort audit committee financial experts leveraging their information advantage in accounting auditing and corporate governance
topic audit committee financial expertise
Sarbanes–Oxley Act (SOX) Section 407
accounting
auditing
corporate governance
url https://www.mdpi.com/2673-8392/5/2/55
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