Implications of directors’ education for audit fees: does the audit committee matter?

Purpose - Building upon multiple theories (i.e. agency, signalling and human capital), this paper aims to explore the effects of directors’ education on audit fees and to assess the mediating role of audit committee (AC). Design/methodology/approach - The authors use an econometric analysis of Italian-listed non-financial firms during the period 2012–2015 using single-mediator models through ordinary least squares and logit regressions. Moreover, the authors apply the path analysis with the bootstrap method to test the mediating effect. Findings - Findings show that the directors’ level of education improves audit fees. Additionally, the presence of an AC and the financial expertise of its members mediate this relationship. Practical implications - By offering insights into the implications for audit pricing of the board and AC human capital, the paper helps regulators and policy-makers to understand which characteristic of such governance bodies improves auditing quality and the provision of better financial reporting. Originality/value - The study uses a unique data set hand-collected from multiple sources and advances the auditing literature by shedding light on the reasons behind the influence of directors’ characteristics on audit fees and on the role played by the AC.