Audit Committee Financial Expertise and Financial Reporting Timeliness in Emerging Market: Does Audit Committee Chair Matter?

This study examines whether audit committee chair with financial expertise enhances the audit committee role in financial reporting quality in emerging market. We investigate this influence by employing the direct effect and moderating effect of audit committee chair with financial expertise on financial reporting timeliness. By using Omani data and the panel data method for two proxies for financial reporting timeliness, we find that audit committee chair with financial expertise enhances the timeliness of financial reporting through making the disclosure of annual reports timely. Further, we report evidence showing that both accounting and nonaccounting financial expertise on the audit committee have a positive and significant influence on the timeliness of financial reporting. We also document that the association between financial expertise and the timeliness of financial reporting is more pronounced when the chair of the audit committee has accounting expertise. This study is among the comprehensive evidence prove that audit committee chair with accounting expertise contributes to the quality of financial reporting in emerging market.

This study examines conceptually the relevance of the audit committee financial expertise to financial reporting timeliness of a firm. The methodology adopted in this study is library research whereby relevant and extant literature related to the audit committee financial expertise and financial reporting timeliness. Audit committee financial expertise was x-ray from the perspective of accounting financial expertise and the non-accounting financial expertise. Observations from the study highlights that the presence of accounting financial experts in an audit committee is an important element that mitigate reportorial challenges and motivates financial reporting timeliness. The study recommends that financial experts in the audit committee should be given more power to enable them discharge their duty effectively and efficiently, the definition of audit committee financial expertise should not relegate other relevant profession to the background, and the impact of the audit committee financial expertise on audit expectation gap should be considered when appointing members of the audit committee. Received: 3 February 2022 / Accepted: 23 February 2022 / Published: 5 March 2022

SUMMARY We investigate how the number of audit committee chair positions and other audit committee financial expertise positions held by the audit committee chairman and the audit committee financial experts affects their ability to oversee a company's financial reporting process. We argue that these two audit committee roles are vital to the functioning of the audit committee and that their over commitment affects audit committee oversight and the firm's financial reporting quality. We observe a significant negative association between financial reporting quality and the number of audit committee chair positions and other audit committee financial expertise positions held by the audit committee chairman. We also find a significant negative association between financial reporting quality and the number of audit committee chair positions and other audit committee financial expertise positions held by audit committee financial experts. Firms with busy audit committee chairs or busy financial experts have significantly higher levels of abnormal accruals, and are more likely to meet or beat earnings benchmarks, which is consistent with the busyness hypothesis. This adverse effect, nonetheless, does not extend to nonaudit committee chairs and nonaudit committee financial experts. We interpret these results to indicate that the busyness of the audit committee chair and financial expert weakens the monitoring and oversight role that audit committees play in the financial reporting process.

We investigate whether new audit committee (AC) chairs provide more effective monitoring of the financial reporting process when they have firm-specific knowledge, proxied for by prior service on the firm’s AC. Consistent with practitioner and governance experts’ views on the importance of firm-specific knowledge, we find that firms are less likely to misstate their financial statements when new AC chairs previously served on the AC. This effect is stronger in the first two years of the AC chair’s succession period and when the incoming AC chair has more prior service on the AC. AC chair industry, accounting, and supervisory expertise, as well as prior experience as an AC chair at a different firm, do not compensate for a lack of firm-specific knowledge. These findings contribute to the literature on the AC chair’s role in the financial reporting process, suggesting that AC chair succession planning is important for financial reporting outcomes.

This study reviews the literature on audit committee expertise and financial reporting timeliness. Financial reporting timeliness and audit committee expertise are two areas of research gaining the attention of a large number of stakeholders because they contribute to the reliability and the relevancy of financial reporting. Indeed, the focus of this review is primarily on the recent developments in the pertinent literature in order to show the limitations of such research and encourage future research to overcome these limitations. By also looking at the development of the audit committee expertise literature, this study concludes that (1) like most audit committee literature, financial reporting timeliness literature continues to assume the absence of the contribution of expertise other than financial expertise, and ignore the role of audit committee chair; (2) most of this literature fails to find a significant effect because it ignores the interaction among corporate governance mechanisms. Accordingly, this study posits that ignoring the issues raised in such research by future research would lead to major mistakes in reforms relating to how the quality of financial reporting can be enhanced.

CEO Characteristics and Timeliness of Financial Reporting of Vietnamese Listed Companies

Audit committee financial expertise and earnings quality: A meta-analysis

This paper examines the effect of audit committee attributes on auditor brand name proxy by the Big 4. The study utilizes 88 listed firms in Nigeria through 440 firm-year observations ranging between the years 2012 to 2016. The data for the study were extracted from the firms’ annual reports and Thompson Reuters DataStream. A panel logistic regression was employed to estimate the model of the study. Consistent with complementary hypothesis the findings demonstrate that audit committee attributes (audit committee independence, audit committee financial accounting experts, audit committee legal expert, female audit committee member and audit committee stock ownership) are positively related to auditor brand name. The findings also support the substitution hypothesis perspectives by revealing an inverse relationship between audit committee meetings, audit committee tenure, audit committee chair and auditor brand name. Our findings offer an initial insight on the effect of audit committee legal expert, and audit committee stock ownership on auditor brand name. Thus, the findings can benefit existing and prospective shareholders who are the direct users of financial reports. This study can also help policy-makers and regulators by allowing them to better recognize the importance of these distinctive audit committee attributes in enhancing the quality of audits, which is one of the most vital elements of improving financial reporting quality. Keywords:Audit committee, Audit quality, Audit size, Gender diversity, Ownership

This paper examines the association between changes of the audit committee (AC) chair on audit quality and audit fees. We find that changes of the AC chair are negatively associated with audit quality. This finding indicates that firm-specific knowledge and task-related experience have an impact on audit quality. Furthermore, AC chair changes are positively associated with audit fees. Specifically, audit fees are approximately 7.14 percent higher following a change of the AC chair. However, our analyses show that our findings depend on the accounting experience of the former AC chair. Thus, if the former AC chair has no accounting experience, the negative effect of AC chair changes on audit quality turns insignificant, which indicates that former AC chair’s firm-specific knowledge and task-related experience only improve the effectiveness of the AC when the former AC chair has simultaneously accounting expertise. This result highlights the importance of accounting expertise for AC chair´s monitoring effectiveness. Similarly, if the former AC chair has accounting experience, the effect on audit fees turns insignificant. We, therefore, conclude that new AC chairs are aware of the supervisory shortcomings of former AC chairs without accounting expertise, and, thus, demand a greater degree of audit procedures from the external auditor resulting in higher audit fees. However, it appears that the extension of audit procedures cannot compensate for the monitoring shortcomings associated with the change of the AC chair and, thus, for the decrease of audit quality.

Objective: Information is the most important source of decision-making, and its important role in the capital market makes it the most important asset. The auditing profession provides useful data for potential investors to have informed decisions by providing information for companies in the form of financial statements. However, the speed of reaction and the right decision by investors depend on the qualitative characteristics of financial statements; and the most important one is timely access to information. According to the theoretical foundation of financial reporting, timely access to information is one of the limitations of financial reporting that overshadows the achievements of qualitative reporting characteristics. Timely annual financial reporting, as an information advantage, remains at the center of investors' attention. On the other hand, the various characteristics of the audit committee chair can overshadow the effectiveness of information disclosure outside and play an effective role in timely financial reporting. The purpose of this study is to investigate the impacts of financial expertise and empirical features of audit committee chairman on timely financial reporting. Method. The statistical population of the study was all the companies listed on the Tehran Stock Exchange during a 6-year period from 2013 to 2018. To test the research hypotheses, we used the OLS model with robust standard errors. Also, to control the confounding effects of industries and different years, we added dummy variables to the regression models. We could examine the confounding influences of industries and years, and the model fits correctly. Results. The results show that there is no significant relationship between financial expertise and empirical features of the audit committee chairman with a delay in the audit report. Also, the additional results obtained from the robustness test strongly support the results of the principal research model. Therefore, there is not enough evidence to support the research hypotheses. Conclusion. The results of the data analysis indicate that the financial expertise and the tenure of the Audit Committee chairman do not help to improve the timeliness of financial reporting. The results also show that the measures of corporate governance concerning the audit committee do not display the expected performance in the companies listed on the Tehran Stock Exchange. The emergence of audit committees as well as the internal audit profession, which complements audit committees, can be a reason for this issue. Lack of knowledge and the necessary basic training, lack of clear instructions, the incomplete formation of audit committees and internal audit unit, and lack of full support of the company's senior management of the internal audit unit can be the reasons for the lack of impact. Over time, we expect more experiences and future reforms of audit committees to become more efficient and effective and to play a prominent role in improving corporate governance indicators.

This study aims to examine the association between having more financial experts in an audit committee and RPT-conflict disclosure among listed firms in Malaysia. This study also examines whether the audit committee's full independence and financial experts' activeness enhance the financial experts' ability to review RPT-conflicts. This study used 1,912 data observations from 478 listed firms in Bursa Malaysia for the financial years of 2011 to 2014. Our results show that having more financial experts as members in the audit committee is significantly associated with RPT-conflict disclosure. The audit committee's independence also slightly enhances the effectiveness of financial experts to review RPT-conflict. However, we found weak evidence to show that financial experts' activeness increased RPT conflict disclosure. The findings recommend a premise to have more financial experts as members in an audit committee, and full independence in interaction with the audit committee enhances the audit committee's effectiveness, specifically in reviewing RPT-conflict.

The Sarbanes-Oxley Act (SOX) (U.S. Congress 2002) mandates the disclosure of whether the audit committee includes a financial expert. ' However, the operationalization of who is a financial expert was and still is a controversial issue (Plitch and Ceron 2003). Some have argued that effective audit committee members are those who have general management experience rather than those who have an accounting or financial background (Olson 1999). The Securities and Exchange Commission (SEC) initially proposed a narrow definition to include only accounting financial experts — that is, directors with experience as a certified public accountant (CPA), auditor, chief financial officer (CFO), controller, or chief accounting officer. Subsequently, the SEC defined financial expert broadly to include nonaccounting financial experts, such as directors with experience as a chief executive officer (CEO) or president (SEC 2003).2 Was the SEC correct in defining financial experts to include both accounting and nonaccounting experts? Do accounting financial experts enhance the quality of financial reporting more than nonaccounting financial experts? These are important questions because the primary objective of SOX was to restore credibility to the U.S. financial reporting system, which was tarnished by several high-profile accounting scandals. Because the audit committee is the ultimate monitor of the financial reporting process, the audit committee's financial expertise is a key determinant of its effectiveness (Treadway 1987). We contribute to this debate by separately examining the association between the audit committee's accounting financial expertise and nonaccounting financial expertise and several attributes of financial reporting quality.

The study examined the impact of the audit committee on the timeliness of the annual financial reports in Jordanian companies listed in the Amman Stock Exchange. The study used correlational research design. The data which collected from the published annual financial reports of 172 companies listed in Jordan for the duration between 2014 and 2016. The result showed that there is a positive and significant relationship between audit committee (audit committee independence, audit committee meeting and audit committee size) and timeliness of financial reports. In addition, there is a positive role for the audit committee to oversee the preparation and publication of financial reports. The study hereby recommend that companies to disclose the annual financial reports in legal time as this has become necessary in view of their impact on investor decisions. And continue to study this type of research for other financial periods.

The study examined the impact of the audit committee on the timeliness of the annual financial reports in Jordanian companies listed in the Amman Stock Exchange. The study used correlational research design. The data which collected from the published annual financial reports of 172 companies listed in Jordan for the duration between 2014 and 2016. The result showed that there is a positive and significant relationship between audit committee (audit committee independence, audit committee meeting and audit committee size) and timeliness of financial reports. In addition, there is a positive role for the audit committee to oversee the preparation and publication of financial reports. The study hereby recommend that companies to disclose the annual financial reports in legal time as this has become necessary in view of their impact on investor decisions. And continue to study this type of research for other financial periods.

PurposeThe purpose of this paper is to investigate whether the characteristics of the audit committee (AC) chair affect audit report timeliness. In particular, the direct association between AC chair accounting expertise and audit report delay, and the moderating effect of other characteristics of AC chair on this association are examined.Design/methodology/approachTo achieve the purpose of this study, the characteristics examined by this study are AC chair expertise, shareholding, tenure and multiple directorships. Furthermore, a sample of Malaysian companies during the period 2005–2011 and the fixed effects panel data method are utilized.FindingsThe results suggest that an AC chair with accounting expertise is associated with a reduction in audit delay. The reduction is more obvious when the chair holds shares in the company, but is weakened by longer tenure and multiple directorships. These results are robust after conducting several robust tests. Using mediating analysis, the authors also document that an AC chair with accounting expertise can enhance the timeliness of audit reports even when the quality of financial reporting is lower. The reported result is supported by additional analysis that finds that AC chairs with accounting expertise and AC chairs with accounting expertise and shareholding are significantly associated with shorter abnormal audit delay.Originality/valueThis study provides comprehensive analysis concerning the association between AC chair and audit report timeliness using a unique setting. It is among the limited evidence that reports the moderating effect of AC chair characteristics on the role of such chair on audit report timeliness.