The impact of audit committees on audit quality : insights from Finnish listed firms

This study investigates the extent to which audit committee characteristics shape audit quality, measured through audit fees, among public listed firms in Finland. Anchored in agency theory, resource dependence theory, and institutional theory, the research explores how robust monitoring mechanisms can help align the interests of managers and shareholders. Three well- established dimensions of audit committee effectiveness are examined: committee existence, member independence, and financial expertise.

The empirical analysis spans five years, from 2020 to 2024, drawing on data sourced from LSEG Data & Analytics to ensure consistency and reliability across financial, governance, and audit-related information. Financial sector firms are excluded owing to the distinct regulatory environments in which they operate. A panel data framework is adopted to capture variation across both firms and time, with firm-specific characteristics such as size, profitability, and leverage included as controls.

The relationships between audit committee attributes and audit fees are estimated using ordinary least squares (OLS) regression. The results show that financial expertise among audit committee members is positively linked to higher audit fees, pointing to more thorough and demanding audit engagements. By contrast, the simple presence of an audit committee or a greater proportion of independent members does not produce a statistically significant effect on audit fees, suggesting that formal governance structures in isolation may be insufficient to guarantee effective oversight. Taken together, the findings emphasize the primacy of expertise over structural characteristics, implying that strengthening the financial competence of committee members may be a more effective pathway to enhanced oversight and higher audit quality.