Are fraud experts relevant? A study of the retail investors' perceptions of audit committee characteristics and corporate governance

This study examined the extent retail investors perceived the level of effectiveness of audit committees (ACs) and corporate governance in relation to perceived satisfaction in the firms' quality of financial reporting. The study also investigated whether retail investors perceived fraud experts' skills relevant to enhancing the quality of financial reporting. This descriptive quantitative study was conducted with a survey instrument developed and validated through a field test and a pilot study. The survey was conducted online with a sample of retail investors (n = 291) in the United States of America. The survey instrument was in a five-point Likert scale. The data that were collected were analyzed with the use of the t -test, and Pearson's correlation, as well as the analysis of variance (ANOVA) statistical techniques. The results from the study indicated that the level of effectiveness of audit committees and corporate governance were relatively effective and adequate in relation to retail investors' perceived extent of satisfaction with the quality of financial reports. The existing requirement that allows at least one financial expert as a member of the AC was perceived by participants to be fairly effective and adequate in relation to retail investors' perceived level of satisfaction with the quality of financial reports. The results also indicated that retail investors considered types of skills of ACs and boards of directors as one of the criteria they used when assessing financial reports and for making investment decisions; and fraud experts' skills was also perceived to be highly important and relevant in improving audit committees' level of effectiveness. Based on the results and findings from this investigation, a further study would be necessary to examine the extent fraud experts' inclusion may improve the effectiveness of audit committees in strengthening corporate governance in organizations.