Corporate Failure Risk in the UK: An Examination of Audit Committee Composition, Practice, and Forensic Expertise

Abstract

Despite extensive governance reforms, recurring UK corporate failures highlight a gap between regulation and practice. This thesis investigates how audit committee (AC) composition and practices affect corporate insolvency prevention in the UK. It focuses on AC attributes including age, tenure, expertise, multiple directorships, gender diversity, nationality diversity, and forensic accounting expertise. Using a mixed-methods approach grounded in agency, resource dependence, and cognitive theories, the study combines quantitative analysis of failed and non-failed UK public firms (2009–2022) with qualitative semi-structured interviews involving AC members, board directors, audit partners, and governance experts to explore the relational and cognitive mechanisms underlying AC effectiveness. The findings indicate that corporate failure risk is lower in firms with older AC members, directors holding multiple board positions, and grater non-financial expertise. In contrast, failure risk increases with longer AC tenure, greater proportions of financial/accounting expertise, and higher nationality diversity. Gender diversity shows no significant association with failure risk. Qualitative evidence further reveals that structural compliance alone is insufficient, as effective oversight depends on professional scepticism, ethical leadership, committee culture, and constructive interpersonal dynamics. In addition, forensic accounting expertise emerges as an important governance resource that enhances the detection of fraud and financial irregularities. The study contributes by extending governance research beyond structural compliance and integrating behavioural and cognitive dimensions into AC effectiveness. It provides UK-specific evidence on AC characteristics and corporate failure, highlights the importance of forensic accounting expertise and cognitive diversity, and supports more behaviourally informed governance reforms aimed at strengthening corporate resilience and failure prevention.