E. Michael Bamber

Discussion of 'Mandatory Audit-Partner Rotation, Audit Quality and Market Perception: Evidence from Taiwan'

We discuss the Chi, Huang, Liao, and Xie (2009) study of the effects of mandatory audit partner rotation, and then identify areas where we see the greatest potential for future research on audit partner rotation and audit quality. First, we discuss how Chi et al. (2009) fits in the context of the extant literature, and we review challenges of examining audit partner rotation versus audit firm rotation. Second, we consider the studys research design. As Chi et al. suggest, the Taiwanese data provide an opportunity to address a research question that cannot be similarly addressed in a North American context. But the data and research design carry their own set of problems, including issues of statistical power. Third, we consider measures of audit quality. Interpreting the study as providing evidence on audit quality assumes not only that audit quality and earnings quality are the same, but also that abnormal accruals and ERCs are good measures of earnings quality, and by extension, audit quality. While such arguments are common in the archival audit literature, we believe it is time to move beyond these generic proxies. Our discussion concludes with suggestions for future research.

Characteristics of audit committee financial experts: an empirical study

Purpose – The purpose of this paper is to examine the characteristics and qualifications of audit committee financial experts. Specifically, the paper examines if the majority of the financial experts possess accounting or general management experience. Design/methodology/approach – The authors collected the data through survey and use cross tabulation (univariate) and logistic regression to analyze the data. Findings – The results show that accounting certification and audit committee experience are valued positively by the Board of Directors when designating an audit committee member as a financial expert. Prior experience as a CEO results in a lower probability of being designated as a financial expert. Research limitations/implications – Non-response bias may be a factor which should be considered. There are other factors such as stock exchange affiliation of the company that have not been included due to the anonymous nature of the survey. Practical implications – It provides useful information and benchmark to the Board of Directors with respect to the characteristics of designated audit committee financial experts. Originality/value – This is the first paper to examine the characteristics of audit committee financial experts through survey. The paper presents a richer array of factors compared to what is available in proxy statements. Audit committees, financial statement users, policy makers, and researchers will find the results interesting and useful.