Abstract
The Jordanian Corporate Governance Code (JCGC) was first enacted in 2004 and revised in 2017. It offers standards for ethical and decent practices in the corporates. Law in Jordan in 2009 has enforced the formation of an audit committee for all listed companies. Literature has substantiated that the audit committee characteristic (ACCs) impact the quality of financial reporting. This work investigates the role of ACCs in lessening the prospect of corporates in obtaining modified audit opinion in the context of Jordan. Four ACC problems (expertise, independent, meeting, and size) have been studied and the modified audit opinion. The total sample of 117 listed companies on the Amman Stock Exchange (ASE) was studied. The relationship between the modified audit opinions (dependent variable), and ACCs (expertise, independent, meeting, and size; as independent variables) was analyzed using logistic regression. The ACCs is projected to effectively improve the quality of financial reporting, and thus, decrease the prospect of corporate in obtaining modified audit opinion. The findings according to the listed companies from 2012 to 2017 in Jordan showed that audit committee (AC) expertise validates this likelihood. Lastly, there is no effect of AC independent, size, and the number of meetings held on the modified audit opinion. General, the findings have policy implications on enhancing corporate governance (CG) efficacy concerning the quality of financial reporting.
Highlights
Following the disastrous and tragic impact of corporate scandals and crises that result in failure of giant firms, for example, Enron, WorldCom, etc. had a shocking influence on the quality of financial reports [1,2,3]
The modified audit opinion is divided into four subclasses: Unqualified with an explanatory paragraph Qualified opinion reports Disclaimer of opinion reports Adverse opinion reports Based on the corporates’ law 22/1997 /article (195/b), following this categorization above, the external auditor must provide an opinion on the firm’s financial reports on one of the subsequent ways: Absolute approval, Approval with reserve the auditor must specify the details for such a reservation and its financial consequence on the firm, Non-approval, the auditor must return the financial reports to the firm's board of directors with the explanations that justify the rejection
We discover that large portion of the corporates in Jordan gotten a modified audit opinion due to the inadequacy of the proper audit proof, which shows the lower quality of their financial statement
Summary
Following the disastrous and tragic impact of corporate scandals and crises that result in failure of giant firms, for example, Enron, WorldCom, etc. had a shocking influence on the quality of financial reports [1,2,3]. The impact of the ACCs on the modified auditor opinion (MAO) in Jordan is investigated exploring the relationship between the ACCs (expertise, independent, meeting, and size) and the provision of MAO among listed corporates in Jordan This present investigation encompasses the study on quality of financial reporting utilizing audit opinion as a determination for the quality of financial reporting and assesses its correlation with ACCs. this study adds to the pool of knowledge in various ways. Saleh Zaid Alkilani et al.: The Influence of Audit Committee Characteristics on Modified Audit Opinion in Jordan policy inferences in enhancing CG efficacy and success concerning quality financial statements
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