Audit Committee Characteristics Research Articles

THE IMPACT OF AUDIT COMMITTEE CHARACTERISTICS ON FINANCIAL REPORTING QUALITY: EVIDENCE FROM SAUDI ARABIA

Purpose: The purpose of this study is to investigate the impact of audit committee characteristics, namely independent members in the audit committee, a financial expert in the audit committee, frequency of meetings, and audit committee size on financial reporting quality proxies by qualified audit opinion, to shed light on the role of audit committee characteristics towards the financial reporting quality with audit quality as one of the control variables, particularly the appointment of Big 4 company. Design/Methodology/Approach: A sample of 292 observations from Saudi non-financial listed companies from 2019 -2022 were collected from annual reports across four years and analyzed using panel data. To analyze the proposed hypothesis, the study employed multiple linear regression and logistic regression. Findings: The results indicate that the only audit committee characteristic statistically related to financial reporting quality measured by qualified audit opinion is the financial expert's number. There is also evidence that audit quality measured by audit company size (Big4) is positively related to the audit committee and financial reporting quality. Research Limitations/Implications: The study’s main limitation is that a large sum of the data collected are traced back to the lockdown period. Therefore, the examined issues could change in the future due to the shift in priorities that the COVID-19 pandemic is determining. Practical Implications: The result will help accountancy professionals and governments as it highlights the relevance of qualified audit opinions to audit committees and enhances audit committees’ characteristics and role in improving audit quality. The findings of this study contribute to the current audit quality and reporting literature.

INFLUENCE OF CEO CHARACTERISTICS AND AUDIT COMMITTEE ON FINANCIAL PERFORMANCE: EVIDENCE FROM IRAQ

The study aims to identify the effect of the CEO and audit committee characteristics on financial performance. To achieve the study's goal, panel data was adopted for 43 private Iraqi banks from 2018-2022 with 215 observations. The data was analyzed using Stata. Three models were used to analyze the data, and the preferred model was chosen by following several confirmation steps. The findings indicated that CEO education, CEO ownership, and CEO experience all influenced financial success. The audit committee's characteristics also played an essential role in the link between the characteristics of the CEO and financial performance. This study is added to critical studies for regulatory authorities and decision-makers, especially since shareholders and decision-makers always seek to appoint CEOs with the capabilities and talents to enable them to achieve shareholders' goals and enhance banks' competitiveness in different environments.

The moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance: evidence from Egypt

Purpose The purpose of this paper is to investigate whether audit committee characteristics, in particular audit committee size, audit committee activity and audit committee gender diversity, are associated with financial performance in Egyptian banks. The second purpose of this paper is to explore the moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance. Design/methodology/approach A multiple regression analysis is used to estimate the moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance of a sample of Egyptian banks during the period between 2018 and 2022. Findings The results indicate that audit committee size has a negative and insignificant effect impact on return on assets (ROA) and return on equity (ROE), respectively. The results also indicate that the audit committee gender diversity has a significant positive impact on ROA and ROE, respectively. Regarding audit committee activity, the number of board meetings has a negative and insignificant effect on ROA and ROE, respectively. Regarding gender diversity as a moderating variable, in general there is a positive effect of gender diversity on the relationship between audit committee characteristics and financial performance. Research limitations/implications The study was limited to 20 banks in one country, but it sets the tone for future empirical research on this subject matter. The study also relied on one moderating variable, which is board gender diversity. This study provides an avenue for future research in the area of corporate governance and financial performance in other emerging countries, especially other African countries. Practical implications This study provides useful insights for managers and policymakers to better understand which audit committee characteristics can best encourage a company to improve financial performance. Furthermore, regulators should ensure that banks strictly adhere to corporate governance principles to build a strong banking industry capable of achieving economic development. Social implications Banks will benefit equally from valuable qualities across demographic groupings in society by having females on the audit committee and appropriate audit committee meetings. Additionally, if audit committee members are correctly selected, banks with more females in audit committee and suitable audit committee meetings can successfully contribute to strengthening financial performance and social welfare of diverse segments of society. A culture of good banking governance must emerge to improve bank financial stability and, as a result, greater stability and economic growth. Originality/value To the best of the authors’ knowledge, the study is, perhaps, the first to examine the moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance in Egyptian banks. This study adds to the literature by investigating such an issue in a developing economy that operates in a different context than those in developed countries.

Effects of Audit Committee on Fraudulent Financial Reporting Among Listed Firms in Kenya.

Fraudulent financial reporting poses significant risks to the integrity of financial markets, investor confidence, and the overall economy. As a result, effective corporate governance mechanisms are crucial in mitigating the occurrence of fraudulent activities. The audit committee, as a key component of corporate governance, plays a vital role in overseeing financial reporting and providing assurance on the reliability of financial statements. This paper aims to explore the effects of audit committee characteristics on fraudulent financial reporting of listed firms in Kenya. Specifically, the study assessed the effect of Audit Committee; gender, financial expertise, size and independence on fraudulent financial reporting. The study was anchored on the Fraud Pentagon theory. Explanatory research design and longitudinal research design was employed in this study where secondary panel data was obtained through content analysis from audited financial statements spanning from 2012 to 2021. The study targeted listed firms in Kenya during the study period and only firms that met the inclusion and exclusion criteria were retained. After applying the inclusion/exclusion criteria only 40 firms formed the study population. Data was analyzed using descriptive and inferential statistics with the significance of each independent variable being tested at 95% confidence level. The findings show that Gender (β1 = -.1154, p=.000.05) and Financial expertise (β2 = -.200, p=.000.05), Size (β3 = -.1457, p=.001.05), and Independence (β4 = -.1818, p=.000.05) had negative and significant effect on fraudulent financial reporting on firms in Kenya. Thus, the study concluded that audit committee characteristics such as gender variability, audit committee size, audit committee financial expertise and audit committee independence significantly influence fraudulent financial reported among listed firms in Kenya. Based on the findings, the study recommends enhancing the effectiveness of the audit committee in preventing fraudulent financial reporting, organizations should strive for gender diversity within the committee. This can be achieved by actively seeking and appointing qualified female candidates to the audit committee. Promoting diversity ensures a range of perspectives and experiences, leading to more robust discussions, increased scrutiny of financial reporting practices, and improved decision-making. Secondly, Organizations should prioritize the independence of the audit committee by ensuring that committee members are free from any conflicts of interest and have no direct ties to management. Additionally, Organizations should carefully consider the size of the audit committee to optimize its effectiveness in addressing fraudulent financial reporting. Lastly, Organizations should establish mechanisms for continuous monitoring and evaluation of the audit committee's performance. Regular assessments of the committee's effectiveness in detecting and preventing fraudulent financial reporting can help identify areas for improvement.

Beyond the bottom line: exploring the role of governance mechanisms in promoting corporate tax responsibility

Purpose Because of growing corporate tax scandals, there is an enhanced focus on corporate taxation by governments, institutions and the general public. Transparency in tax matters has been identified as critical for effectively managing and promoting socially responsible tax behaviour. This study aims to explore the impact of ownership structure, board and audit committee characteristics on corporate tax responsibility (CTR) disclosure. Design/methodology/approach This research collected data from the annual reports of Pakistani-listed firms over 12 years, from 2009 to 2020. Consequently, the data set encompasses a total of 1,800 firm-year observations. This study uses regression analysis to test the relationship between corporate governance and CTR disclosure. Findings The results show that board gender diversity, managerial ownership and audit committee independence promote tax responsibility disclosure. In contrast, family board membership, CEO duality, foreign ownership and family ownership negatively impact tax responsibility disclosure. Additional analyses reveal the specific information categories that produce the overall effects on tax responsibility disclosure and assess the moderating impact of family firms on the governance and CTR disclosure nexus. Practical implications Corporations can use the results to encourage practices that enhance transparency and improve the quality of disclosures. Regulatory authorities can use the findings to stipulate better protocols. Doing so will be vital for developing countries such as Pakistan to improve tax revenue and cultivate economic growth. Originality/value While this research represents, to the best of the authors’ knowledge, one of the first empirical investigations of the association between corporate governance and CTR, the results contribute to the corporate governance literature and offer fresh insights into CTR, an emerging dimension of corporate social responsibility.

How Audit Fees Impact Earnings Management in Service Companies on the Amman Stock Exchange through Audit Committee Characteristics

The primary objective of this research was to investigate the potential moderating role of audit fees in the relationship between audit committee characteristics and earnings management. Specifically, this study aimed to establish connections between audit committee features, such as committee size, member independence, and financial expertise, and the practice of earnings management. To address these research questions, a convenient sample of 46 service providers listed on the Amman Stock Exchange between 2016 and the subsequent year was employed. Descriptive statistical methods were applied to characterize the variables under investigation, while a multiple regression model was utilized to assess the study’s hypotheses. The findings of the study revealed that there was no significant correlation between the size of the audit committee and earnings management. However, a negative correlation was observed between the audit committee’s independence and the financial expertise of its members. Importantly, when audit fees were introduced as a moderating variable, the relationships between committee member independence and earnings management, as well as between committee member financial expertise and earnings management, were found to be weakened. These results have potential implications for policymakers and regulators in Jordan. They may offer valuable insights into corporate governance reforms that could assist Jordanian businesses in enhancing their earnings management practices.

The financial performance of Lebanese banks up to the financial crisis: do audit committee characteristics and ownership concentration matter?

PurposeThe focus on corporate governance has increased after the financial collapses of several banks worldwide, such as Silicon Valley Bank and First Republic Bank in the USA, and the failure of the Lebanese banking sector. This study examines the impact of audit committee (AC) characteristics on financial performance and investigates the moderating effect of ownership concentration (OC) on the associations between AC characteristics and profitability.Design/methodology/approachThe current research is carried out based on 211 Lebanese banks’ annual reports, focusing on the period from 2012 to 2021. The ordinal least squares (OLS) and the hierarchical multiple regression analysis were adopted to test the study’s hypotheses.FindingsThe outcomes reveal that AC size, AC frequency of meetings, and banks’ size (control variable) positively affect financial performance; however, OC does not moderate the associations between the AC characteristics and banks’ profitability.Originality/valueAccording to the researcher’s knowledge, no prior study has investigated the moderating effect of OC on these associations. Moreover, the current study contributes to the literature that documented mixed and inconsistent results regarding the direct associations between AC characteristics and financial performance.

Audit committee characteristics and firm financial performance of quoted industrial goods firms in Nigeria

Purpose: This study examines the effects of audit committee characteristics on the financial performance of listed industrial goods firms in Nigeria. Research methodology: This study used an ex-post factor research design and utilized secondary data collected from the annual reports and accounts of thirteen (13) sampled industrial goods firms for a period of 10 years (2013-2022). The sample of firms was obtained using a purposive sampling technique. Data were analyzed using descriptive statistics, correlation, and regression analysis (GLS Random Effect) with the aid of Stata 13. Results: The findings reveal that an insignificant positive effect exists between audit committee size and financial performance (ROA and ROE), while audit committee independence has a significant negative effect on return on assets (ROA) and a negative insignificant effect on return on equity (ROE), and audit committee meetings have a positive significant effect on asset (ROA) and a positive insignificant effect on return on equity (ROE). Limitations: The research is limited to only those companies in the industrial goods sector listed on the Nigerian Stock Exchange from 2013 to 2022 and only focuses on the effect of audit committee characteristics on firm financial performance. There was also incomplete data, which did not allow for a complete and thorough analysis of the entire sector. Contribution: This study contributes to the existing body of literature on the effect of audit committees on the financial performance of Nigeria’s listed industrial goods sector. It provides insights that can assist the board in formulating appropriate strategies to improve their performance.

Corporate Governance as Antecedent of Financial Distress: Case Study of Textile Industry of Pakistan

Purpose: The present research studies the effect of corporate governance practices on the level of financial distress of the Textile companies listed at PSX. 
 Design/Methodology: Data from 2019 to 2022 from a sample of 43 companies operating in the weaving, spinning and composite textile industry was assessed in the study. Regression analysis was used to predict the impact of board independence, board size, audit committee independence and duality in the role of CEO and chairman on the financial distress.
 Findings: The findings reveal that board independence, board size and the duality in the role of Chairman and CEO impacts the financial distress level of the companies and that in companies wherein governance structure is strong, the likelihood of financial distress is lower. However, the effect of Audit committee independence is found to be insignificant in this study.
 Originality: This study provides support to the companies in understanding the importance of governance structure and its significance in reducing financial distress level. The findings of the study will be of value to the companies operating in textile sector by enabling them to strengthen their governance structure to address the financial distress situation. Further, this study will help the regulators in drafting the governance requirements for the companies and also educating them about the importance of the latter. In future, other studies using different proxies of corporate governance like gender diversity in the board, number  of board meetings and characteristics of audit committee may be conducted..

Audit committee characteristics and earning management of insurance companies in Ethiopia

Audit committee characteristics and earning management of insurance companies in Ethiopia

Audit committee characteristics and tax planning: evidence from the ago-industry in listed companies in Thailand

Audit committee characteristics and tax planning: evidence from the ago-industry in listed companies in Thailand

Audit Committee Characteristics and Firm Performance with the Moderating Role of Political Connections

Audit Committee Characteristics and Firm Performance with the Moderating Role of Political Connections

Internationalization of enterprises and quality of financial reports in China: Moderating roles of audit committee characteristics

In the process of seeking sustainable development, enterprises have chosen international business strategy. The purpose of this study is to examine the relationship between the degree of internationalization of Chinese listed firms and financial reporting quality, as well as whether audit committees can moderate the impact of enterprise internationalization on financial reporting quality. The empirical analysis results of Chinese listed manufacturing firms from 2014 to 2018 show that: the degree of corporate internationalization has a significant U-shaped relationship with earnings management. This new finding solves the problem that scholars have inconsistent views on the internationalization of enterprises and the quality of financial reporting. The study also found that audit committees with experience working in accounting firms can inhibit firm earnings management behavior in the early stage of internationalization; audit committees with experience working overseas can inhibit firm earnings management behavior in the later stage of internationalization; the higher the remuneration of audit committee experts, the more it can inhibit firm earnings management behavior in the early stage of internationalization. In the later stage of internationalization, the higher the remuneration of audit committee experts, it helps the earnings management behavior of firms. This provides new evidence on the functioning of the audit committee’s role; however, the independence of the audit committee and the proportion of financial experts do not have a significant effect on the inhibition of earnings management.

The Impact of Audit Quality, Attributes of The Audit Committee, and Institutional Ownership on the Promptness of Financial Reporting

This research investigates and tries to find empirical evidence regarding the impact of audit quality, audit committee characteristics, and institutional ownership on the timeliness of submitting financial reports. The method’s approach applied in this research is associative quantitative research using secondary data in the form of annual financial reports taken from the official website of the Indonesia Stock Exchange. All Food and Beverage sector companies listed on the Indonesian Stock Exchange are the population for this research. The sample was selected by applying a purposive sampling technique using predetermined criteria. The total number of samples used was 60 data over a research period of 5 years. The analytical method applied in this research is multiple linear analysis using the Eviews 9 program. The findings of this research show that there is an impact of auditor quality on the timeliness of submitting financial reports, while the size of the audit committee, frequency of audit committee meetings, and institutional ownership do not have a significant influence on the timeliness of submitting financial reports.

Audit committee characteristics and firm performance: a cross-country meta-analysis

PurposeThe purpose of this study is to investigate the impact of audit committee characteristics on firm performance. In particular, the authors employ the random-effects variant of the Hunter–Schmidt meta-analyze procedure to analyze the effects of key audit committee attributes, namely audit committee independence, audit committee expertise, audit committee size, audit committee meeting along with big four impact on firm performance. The authors hope to gain a better understanding of the function of audit committees in enhancing firm performance and to uncover potential discrepancies in prior findings due to varying economic levels or performance metrics.Design/methodology/approachThis study uses the Hunter–Schmidt method to conduct a meta-analysis of 39 previous studies published between 2012 and 2022 to investigate the relationship between audit committee characteristics and firm performance.FindingsThe results indicate that audit committee independence, expertise, size and affiliation with the big four have a significant and positive effect on firm performance, while audit committee meetings have a non-significant effect. Furthermore, findings suggest that companies should carefully consider the contextual factors that may impact the effectiveness of their corporate governance structures, such as economic level, when designing and implementing governance mechanisms.Originality/valueThis study is significant as it is the first to combine and analyze previous research on this topic and highlights the importance of certain audit committee characteristics in enhancing financial reporting quality and corporate governance.

Connection Between the Audit Characteristics and Corporate ESG Performance in Indonesia

This research delves into the essential connection between audit committee characteristics and the ESG performance of corporations in Indonesia. Existing studies emphasize the pivotal role of audit committees in shaping ESG outcomes, focusing on factors like independence, expertise, and committee size. However, there is a limited comprehensive examination of these dynamics within the context of Indonesian businesses. The study seeks to empirically examine the correlation between audit committee characteristics and corporate ESG performance among listed companies on the Indonesia Stock Exchange, explicitly exploring four key attributes. The results highlight a noteworthy influence of Audit Expertise and Internal Auditor characteristics on corporate ESG performance. These findings provide valuable insights for companies, auditors, and policymakers, offering empirical evidence to enhance comprehension and practices related to corporate governance and ESG performance. Furthermore, the study's implications extend beyond the Indonesian context, contributing to a broader understanding of the global discourse on sustainable business practices.

The effect of audit team and audit committee performance on the quality of audit

The study investigates the impact of audit committee performance (ACP) and audit team (AT) characteristics on audit quality. The research problem emerges when we question whether the characteristics of audit committees (ACs) impact audit quality. Additionally, an inquiry arises regarding the influence of the characteristics of the audit (CAT) team within the audit offices of Iraqi audit firms (AFs) on the audit quality. ACP characteristics include the number of members, independent members, financial and accounting experience of committee members, meeting frequency, and the presentation of financial annual reports (FARs) and auditor’s reports. CAT encompasses the team’s number, experience and industrial specialization (EIS), auditor’s judgment, and time required for audit tasks. We relied on a study (Husain, 2020; Alderman & Jollineau, 2020; Al-taee & Flayyih, 2022) in the study model design. The sample comprises 82 firms from the Iraq Stock Exchange with disclosed financial reports (2021–2022). The results reveal that the presentation of FARs and the industrial specialization and experience of CAT significantly influence audit quality, while other variables show no significant impact.

The moderating role of key audit matters in the relationship between audit committee characteristics and audit report lag

The audit committee roles are essential to corporate governance because they are accountable in many aspects of financial governance. In order to understand the relationship between audit committee meeting (ACM) frequency, audit committee size (ACZ), and audit report lag (ARL) in Jordan, this study looked at the moderating effect of key audit matters (KAMs). A correlational research strategy was employed in the study. The data gathered from the 144 Jordanian enterprises for the period of 2016 to 2020 were disclosed in their published annual financial reports. The results show that, in terms of audit committee characteristics, there is no association between ARL and ACZ. Moreover, there is a non-significant relationship found between ACM and ARL. Furthermore, the outcome shows that KAMs and ARL are not significantly associated. On the connection between ACZ and ARL, however, the interaction impact of KAMs shows no moderating effect. Furthermore, the results show that the relationship between ACM and ARL is unaffected by the use of KAMs as a moderating variable. Given their influence on investor decisions, the study hereby advises businesses to pay close attention to the date of the external auditor’s report.

The nexus between free cash flow, audit committee characteristics, and earnings management practices

The nexus between free cash flow, audit committee characteristics, and earnings management practices

The nexus between free cash flow, audit committee characteristics, and earnings management practices

The nexus between free cash flow, audit committee characteristics, and earnings management practices