Women on board and auditors’ assessment of the risk of material misstatement

This paper considers the role of female directors’ statutory and demographic attributes in examining the relationship between the presence of women on board and auditors’ assessment of the risk of material misstatement. Using a sample of French listed companies between 2002 and 2010, we find that presence of women on board is negatively related to auditors’ assessment of the risk of material misstatement, but this relationship becomes positive when female directors’ attributes are included in regression analyses. These results suggest that attributes have a substantial effect on the relationship between female directors and auditors’ assessment of the risk of material misstatement. In particular, we find that female directors’ audit committee memberships, financial expertise, and experience reduces the risk of material misstatement. However, board leadership by women is not associated with auditors’ assessment of the risk of material misstatement. Finally, our findings have important implications for legislators’ and policymakers’ understanding of the importance of female directors’ attributes and skill sets while promoting gender diversity on corporate boards.