Evidence on the relation between audit committee financial expertise and internal audit function effectiveness

Purpose - The purpose of this paper aims to investigate whether the source of audit committee accounting expertise influences the internal audit function (IAF) effectiveness in the Tunisian setting. Design/methodology/approach - In the analysis, the authors conduct a survey of chief internal auditors from Tunisian listed companies. Then, a multivariate regression analysis is performed in order to analyze the relationship between audit committee financial expertise and IAF effectiveness. Findings - The findings of the present study show that audit committee accounting financial expertise is most likely to be positively associated with the implementation of internal audit report recommendations. The authors also find that only financial expertise gained from accounting education and experience (e.g. an audit committee member with experience as a certified public accountant, auditor, chief financial officer or chief accounting officer) is associated with a stronger implementation of IAF recommendations, but not financial expertise gained from work experience in finance positions. Practical implications - These results may have implications for regulatory bodies. They can provide a better understanding of the role of the audit committee expertise in monitoring internal audit processes. The major contribution of this study is that the audit committee's oversight role is strengthened if the committee members have accounting and auditing expertise. Originality/value - The study extends prior literature by providing evidence that the source of audit committee accounting financial expertise enhances internal audit effectiveness beyond the outcomes it has on financial reporting quality. The study also contributes to the ongoing debate in the corporate governance literature concerning the definition of the financial expertise of audit committee members.