The Impact of Financial and Industry Expertise of UK Audit Committees on Key Audit Matters’ Readability

Purpose: This study focusses on audit committees' financial and industry expertise and their impact on the readability of key audit matters (KAM).Design/methodology/approach: Analyses were conducted with data on a sample of UK listed companies for the fiscal years of 2014–2017 (i.e. 1,319 firm-year observations). Correlation and regression analyses were conducted to evaluate possible links between either financial or industry expertise and combined financial and industry expertise in audit committees on the one hand and KAM readability on the other hand. We rely on popular readability measures (Flesch Reading Ease and Fog indices).Findings: Audit committees' financial and industry expertise has a positive impact on KAM readability. Furthermore, combined expertise has a stronger effect compared with either financial or industry expertise. Insofar, audit committees should have more diverse expertise to ensure better auditor reporting.Research/practical implications: Companies, regulators and researchers could be signifi-cantly affected by the finding that managerial ability variables such as audit committee expertise can have a considerable impact on KAM disclosure.Originality/value: To our best knowledge, this is the first study on the link between audit committees' FIE and KAM readability