Are Audit Committees more challenging given a specific investor base? Does the answer change in the presence of prospective critical audit matter disclosures?

This study examines the joint effect of investor sophistication and the prospect of critical audit matter (CAM) disclosure on experienced audit committee members' propensity to ask challenging questions about management's significant accounting estimates. Using the theory of helping behavior and social responsibility norm, I predict that audit committee members will ask more challenging questions given a more unsophisticated investor base, particularly when there is a prospect of additional CAM disclosures in the audit report. I test my hypotheses using highly experienced audit committee members in an experimental setting. The results are supportive of my hypotheses. Additional analysis indicates the results are driven by audit committee members perceiving greater oversight duty in the presence of a more unsophisticated investor base and when there is the prospect of additional CAM disclosures. Overall, my findings shed light on factors that affect audit committee members' questioning behavior in the oversight process and are likely of interest to regulators and standard setters given their traditional emphasis on protecting unsophisticated investors as well as the current move towards expanding the audit report to include CAMs. (C) 2019 Elsevier Ltd. All rights reserved.