The Impact of Audit Committee Characteristics on the Creative Accounting Practices Reduction in Jordanian Commercial Banks

Khalil Suleiman Abu Saleem

doi:10.5539/mas.v13n6p113

Abstract

This study aimed at determining the impact of the characteristics of the Audit Committee (The effect of Activity of the Audit Committee, the size of the Audit Committee, and Independence of the Audit Committee) in reducing creative accounting practicesin Jordanian commercial banks.The study population is composed of all Jordanian banks listed on the Amman Stock Exchange (16), during the period from 2011 to 2017. The study sample is represented by all Jordanian commercial banks. The current study is based on panel data since the data combine one-time and cross-section data for a period of time. The data was composed of a set of indicators for 13 Jordanian commercial banks for the period from 2011 to 2017, and data have been collected from the banks&#39; annual reports. The adoption of the study on the analysis of time-series data comes from the increase in degrees of freedom.  The results of the hypothesis test indicate that there is a significant effect of Audit Committee characteristics on the reduction of creative accounting practices in Jordanian banks at a level of significance of 0.05 except for variable (size of the Audit Committee).

Highlights

The conflict of interest between the various parties involved in the company is the main reason that led to the emergence of creative accounting, which is one of the most important means used by the administration to achieve its goals and objectives
Table (2) show that the value of the regression coefficient at the variable reached (1.128), and with a significance level (Prob = 0.000), which is less than 0.05, possible to say that there is a significant impact of the Audit Committee's activity in reducing creative accounting practices
Table (2) show that the value of the regression coefficient at the variable reached (0.044), and with a significance level (Prob = 0.085), which is greater than 0.05, possible to say that there is no significant effect on the size of the Audit Committee in limiting creative accounting practices

Summary

Introduction

The conflict of interest between the various parties involved in the company is the main reason that led to the emergence of creative accounting, which is one of the most important means used by the administration to achieve its goals and objectives. The importance of the study stems from the role that the Audit Committee's role can play in reducing creative accounting practices that violate the spirit of good accounting practice and are intended to provide misleading information that serves the interests of the Company and its management. The study problem can be framed by the following main question: Is there an impact of audit committee characteristics on the creative accounting practices reduction in Jordanian commercial banks? 1. Does the activity of the audit committee affect the reduction of creative accounting practices in Jordanian commercial banks?

Objectives

Methods

Results

Conclusion