Report Of Auditing Committee Research Articles

The Effect of Companies' Internal Control Structures on Their Financial Performance: An Application on BIST-30

Purpose: The aim of this study was to investigate the effect of internal control structures on the financial performance of firms included in the BIST-30 Index. Design/Methodology: The data of the firms for the period 2018-2022 were used annually. Return On Equity and Market value to book value were used in the study to represent profitability as dependent variables. The independent variables were the number of audit committee members, the number of internal control reports, the number of audit committee meetings, the number of audit committee reports, and the rate of graduates in the audit board. GMM which is a dynamic panel data analysis technique and Driscoll Kray Regression were used as the method. Findings: As a result of the findings, it is seen that the ratio of postgraduates on the audit committee, the number of audit committee members and the number of audit committee reports may have an effect on both ROA and PBRD, while the audit firm being a large firm may have an effect only on PBRD. Limitations: The reason is that the study was applied only to Türkiye and no country comparison was made. Originality/Value: There are a limited number of studies examining the impact of companies' internal control structures on their financial performance. This study is original in terms of both variables and method.

Audit Committee Report and Financial Performance of the Manufacturing Firms Listed on Nairobi Securities Exchange

Purpose: This research evaluated the effects of audit committee reports on the financial outcomes of manufacturing firms that are listed on the Nairobi Securities Exchange. Methodology/Approach: Panel data analysis was employed in the study, it utilized quantitative, and correlational research designs were applied. Data gathered from audited financial statements of respective firms. The study utilized secondary data obtained historically from the NSE. Data was collected, coded, entered, cleaned, and analysed using the STATA 15. Findings: The findings of this analysis give compelling evidence against null hypotheses. The study found that manufacturing firms with robust audit committee reports tend to exhibit stronger governance structures and oversight mechanisms. Implications: The study recommends Manufacturing firms should prioritize engaging auditors with relevant industry expertise and specialized knowledge.

Audit Committee Report and Financial Performance of the Manufacturing Firms Listed on Nairobi Securities Exchange

Purpose: This research evaluated the effects of audit committee reports on the financial outcomes of manufacturing firms that are listed on the Nairobi Securities Exchange. Methodology/Approach: Panel data analysis was employed in the study, it utilized quantitative, and correlational research designs were applied. Data gathered from audited financial statements of respective firms. The study utilized secondary data obtained historically from the NSE. Data was collected, coded, entered, cleaned, and analysed using the STATA 15. Findings: The findings of this analysis give compelling evidence against null hypotheses. The study found that manufacturing firms with robust audit committee reports tend to exhibit stronger governance structures and oversight mechanisms. Implications: The study recommends Manufacturing firms should prioritize engaging auditors with relevant industry expertise and specialized knowledge.

The Influence of Institutional Ownership, Audit Committee, Independent Commissioner, Auditors Switching on The Integrity of Financial Statement and Audit Quality as a Moderation Variable in Manufactured Companies Listed on The Indonesian Stock Exchange in 2017-2021

This research aims to determine the influence of institutional ownership, audit committee, independent commissioners, and auditors switching on the integrity of financial reports in consumer goods industrial sector companies listed on the Indonesia Stock Exchange. This research also aims to determine whether audit quality can be used as a moderating variable for the relationship between institutional ownership, audit committee, independent commissioner, auditor switching, and financial report integrity. The research design carried out was causal relationship research with a quantitative approach. The sample in this research was 35 companies in the consumer goods industry sector listed on the Indonesia Stock Exchange in 2017-2021. The type of data used in this research is secondary data. The sample research technique uses purposive sampling. The data analysis technique uses multiple linear regression analysis and a residual test for moderating variables. The results of this study show that partially institutional ownership and auditors switching have a positive and significant effect on the company's financial performance. Meanwhile, the audit committee and independent commissioners do not significantly influence the integrity of financial reports. Other results also show that audit quality can moderate the influence of institutional ownership and change of auditors but cannot significantly moderate the audit committee and independent commissioners on the integrity of financial reports in manufacturing companies in the consumer goods industry listed on the Indonesia Stock Exchange. Keywords: institutional ownership, audit committee, independent commissioner, change of auditor, financial report integrity, audit quality

JSE Delisted Companies' Use of Impression Management Practices in the Chairman’s Statement and Audit Committee Report Preceding Delisting from the 2016-2021 Period

The study examined whether Johannesburg Stock Exchange (JSE Ltd) delisted companies used impression management in the chairman’s statements and audit committee's reports preceding delisting from 2016 to 2021. There is a concerning trend of delisting from JSE, which may be voluntary or compulsory. The chairman’s statement is highly ranked as the most read voluntary narrative disclosure statement. Furthermore, as assurance providers and governance structure, the audit committee is expected to assure the organisation as a whole. The study uses quantitative content analysis on integrated reports of the JSE-delisted companies from 2016 to 2021. Impression management is examined for length, use of passive voice, and the use of personal references in the chairman’s statement and audit committee report. The study examined and provided insight into impression management practices used by delisted companies and ascertains whether there is a systematic difference in the use of impression management between profitable and unprofitable in the year preceding delisting. The study shows that delisted companies used impression management on the verge of delisting and this opportunistic behavior was used by both boards of directors and audit committees. This study contributes to the novelty of knowledge on impression management. It is the first of its kind.

Audit Committee Report

Audit Committee Report

Audit Committee and Audit Report Lag: A Literature Review

The paper aims to review studies dealing with audit report lag or audit delay and the Audit Committee in accounting literature over the period of 2006-2022. Research on factors related among audit report lag and audit committee has become more widespread in recent years and there was a considerable upsurge in these papers. This study combines electronic and manual searches to identify relevant studies. The search was performed using keywords such as “audit committee” and “audit report lag” or "audit delay" or "audit lag" and in total, 35 published studies were identified. The findings show that the majority of research studies the relevance of audit report lag / audit delay to the effectiveness of the Audit Committee which represented by its key characteristics (size, independence, member financial expertise, frequency of meetings, presence of women). The future shows that researchers are turning to additional characteristics of Audit Committee members to check whether they relate to audit report lag. Finally, we stand for the future of research with suggestions for new researches.
 
 Keywords: Audit Delay, Literature Review, Corporate Governance
 JEL: M42, G34

Audit Committee and Audit Report Lag: Moderating Role of Ownership Concentration of Listed Consumer Goods Firms in Nigeria

This study examines the moderating role of ownership concentration on the effect of audit characteristics on audit report lag of listed consumer goods firms in Nigeria. The ex-post facto research design was adopted, secondary data was extracted from annual reports and accounts of listed consumer goods firms in Nigeria. The population of the study is twenty-one (21) and the sample size consist of fifteen (15) for ten years (2012-2021). Six (6) companies were flitter out from the study due the technical suspension by NXG during the period of study. Census sample techniques were adopted. PCSEs regression model was employed as technique of data analysis. The findings of the study revealed that the Audit Committee Size (ACS) and Audit Committee Meeting have a positive and significant effect on Audit Report Lag (ARL). Also, the Audit Committee Financial Expertise (ACFE) revealed a positive and insignificant effect on Audit Report Lag (ARL), while the Audit Committee Independence is established to have a negative and insignificant effect on Audit Report Lag (ARL). However, with consideration of moderating role ownership concentration, the Audit Committee Size (ACS) and Audit Committee Meeting (ACM) is found to have significant negative effect on Audit Report Lag (ARL), while the Audit Committee Financial Expertise and Audit Committee Independence are found to have a positive and insignificant effect on Audit Report Lag (ARL). The study concludes that ownership concentration moderates the effect of audit committee on Audit Report Lag. The study recommended that the management of the study firms should continue to sustain the frequency of meetings and size or numbers of the committee in their respective audit committee since the two committee have been empirically proven to have significantly reduced the timeframe of reporting their financial reports.

The Role of Audit Quality as a Moderating Variable in Relationship Between Quality of Audit Committee, Company Size and Financial Report Integrity of Manufacturing Companies Listed in IDX

With audit quality serving as a moderating variable, the goal of this study is to examine and collect empirical data on the impact of audit committee quality and business size on the caliber of financial reports. Accounting knowledge, committee size, and meeting frequency all indicate the quality of an audit committee. Manufacturing businesses that were listed on the Indonesia Stock Exchange between 2013 and 2016 were used as a sample in this study. 33 manufacturing enterprises with a 4 year observation period were included in this study. Purposive sampling was used to collect the data. The multiple regression model and moderated regression analysis were used in this study to examine the hypotheses. The findings of this study revealed that the caliber of financial reports was unaffected by the audit committee's experience, the frequency of its meetings, or the size of the accounting and financial firms. Regarding the moderating influence of audit quality, the findings indicated that it was unable to moderate the relationship between the business size and the integrity of financial reports and all audit committee quality proxies.

Language, perceived warmth, and investors' reactions to audit committee reports

AbstractAn audit committee (AC) report is the primary channel through which investors learn about the responsibilities and activities of an AC. AC members may use personal language (“we”) or impersonal language (“the audit committee”) in an AC report. Psychology research suggests that personal (vs. impersonal) language signals that the language user has greater warmth and sense of communion (i.e., being part of a larger group). Applying this theory, we predict that an AC's use of personal (vs. impersonal) language leads investors to perceive a warmer and more communal AC, and that an AC's perceived warmth/communion (cued by personal language) positively impacts investor judgments. We further posit that the positive effect of personal language is stronger when AC compensation is largely short term than long term. This is because investors need more assurance of AC oversight effectiveness when AC compensation is short term, which makes investors rely more on heuristic cues such as AC language to make judgments. Consistent with this prediction, we find that when AC compensation is largely short term, nonprofessional investors (proxied by Master of Business Administration students) react more positively to an AC's use of personal language than impersonal language. The effect of AC language is insignificant when AC compensation is largely long term, as the long‐term compensation structure already provides assurance about the AC's oversight effectiveness, and thus, investors rely less on heuristic cues. Furthermore, we find that the perceived warmth of AC members explains the effect of AC language. Finally, our interviews with nonprofessional investors corroborate some of our main findings and validate their practice implications.

Disclosure of auditor risk assessments in expanded audit reports

PurposeThis rich descriptive study examines auditors' client risk assessment (i.e. “key audit matters”/critical audit matters) disclosures in expanded audit reports of 328 Financial Times Stock Exchange (FTSE) 350 companies. The study compares auditor-identified client risks with corporate risk disclosures identified in audit committee reports, in terms of number and type of risks. The research also compares variation in auditor-identified client risks between individual Big 4 audit firms. In addition, the study examines auditor ranking of their client risks disclosed.Design/methodology/approachThe study manually content analyses disclosures in audit reports and audit committee reports of a sample of 328 FTSE-350 companies with 2015 year-ends.FindingsAudit committees identify more risks than auditors (23% more risks). However, auditor-identified client risks and audit-committee-identified risks are similar (80% similar), as are auditor-identified client risks between the individual Big 4 audit firms. Only ten (3%) audit reports rank the importance of auditor-identified client risks.Research limitations/implicationsSample is restricted to one year, one jurisdiction, large-listed companies and companies audited by Big 4 auditors.Practical implicationsThe study provides important insights for regulators, auditors and users of financial statements by identifying influences on disclosure of auditor-identified client risks.Originality/valueThe paper mobilises institutional theory to interpret the findings. The findings suggest that auditor-identified client risks in expanded audit reports may demonstrate mimetic behaviour in terms of similarity with audit-committee-identified risks and similarity between individual Big 4 audit firms. The study provides important insights for regulators, auditors and users of financial statements by identifying influences on disclosure of auditor-identified client risks.

Language, Perceived Warmth, and Investors’ Reactions to Audit Committee Reports

Language, Perceived Warmth, and Investors’ Reactions to Audit Committee Reports

The Role of Audit Committee in Evaluating Management Control: The Case of Ministry of Health, Poland

The primary purpose of an audit committee is to provide information on the management control process and the internal audit process for their ministries, ensuring compliance with laws and regulations. The main objective of the article is to determine the role of the audit committee in the assessment of the functioning of the man-agement control system in the Ministry of Health, with particular emphasis on organizational, legal and execu-tive regulations. There were used analysis of documents of audit committee reports and the minister's state-ments on management control in years 2018-2022. Apart from that, in the paper, one can find an example of functioning of an audit committee and its objectives, tasks and the role in evaluating of management control in the Ministry of Health. The results show that between 2018 and 2022, all statements on the state of manage-ment control of the Ministry of Health were rated B, which means that adequate, effective and efficient man-agement control functioned to a limited extent. On the contrary, the audit committee of the Minister of Health assumed that there is no need to signal material risks or weaknesses in management control. Selected objectives and measures of objective achievement in the management control of the Ministry of Health are discussed in the paper.

Pengaruh Good Corporate Governance dan Ukura Perusahaan terhadap Pengungkapan Sustainability Report serta Dampaknya terhadap Return Saham

This research aims to examine the effect of institutional ownership, board of commissioners, audit committee, and firm size on the disclosure of sustainability reports and their effect on stock returns. The data analysis method used is panel data regression analysis using eviews version 10. In this study, the sampling technique used was purposive sampling. The sample of this research is banks that publish financial reports and sustainability reports during 2018, 2019, and 2020 where finally 10 banks are obtained. Statistical method using multiple linear regression analysis, with hypothesis testing statistical test t. The results of this study indicate that the size of the company affects the sustainability report and the disclosure of the sustainability report can mediate the effect of institutional ownership, the board of commissioners, the audit committee, and the size of the company on stock returns. Institutional ownership, the board of commissioners, the audit committee have no effect on the sustainability report. Institutional ownership, board of commissioners, audit committee, company size, and sustainability report have no effect on stock returns.

Banks' voluntary disclosure in the audit committee reports, cost of equity and the mediating role of financial analysts

Voluntary disclosure in the audit committee report is expected to provide additional information about the activities undertaken to protect investors. The Securities and Exchange Commission's (SEC) ultimate aim in initially promulgating audit committee disclosure requirements was to reduce firms' cost of equity. However, prior research finds that voluntary disclosure in the audit committee report is akin to impression management. In 2015, the SEC issued a concept release encouraging audit committees to provide additional voluntary disclosures in their reports beyond mandatory requirements. In that context, this paper analyses the effect of the audit committee voluntary disclosure on the cost of equity, with financial analysts playing a mediating role. The sample comprises the top US bank holding companies from 2006 to 2015. We manually code the voluntary disclosure in audit committee reports using a scoring grid. Results show that audit committee voluntary disclosure increases the cost of equity. In addition, the association between voluntary disclosure and the cost of equity is mediated by financial analysts. Hence, we infer that the impression management undertone of voluntary disclosures affects financial analysts' coverage and forecasting properties, which in turn lead to an increase in the cost of equity. The paper's empirical evidence highlights the effects of impression management disclosure by analysing corporate governance voluntary disclosures, cost of equity and financial analysts and brings the issue to the attention of banking regulators, SEC and investors.

Audit Committee Chair Monitoring Incentives to Use Voluntary Disclosure in the Audit Committee Report Under High Agency Conflicts

This study evaluates whether an association exists between the agency incentives of the audit committee chair and voluntary disclosure of their monitoring activities in their audit committee report. Prior research suggests that a shift toward greater voluntary disclosure in the audit committee report occurred following the passage of the Sarbanes–Oxley Act but does not directly address the determinants of voluntary disclosure. Consistent with agency theory, audit committee chairs signal their duty-specific monitoring activities to shareholders, possibly to protect their reputation and justify their compensation. Within a high-litigation industry, this study provides evidence that audit committee chairs with a greater reputation level (i.e., more public company directorships) provide more concise duty-specific voluntary disclosure when serving companies with high levels of agency conflicts. This provides evidence consistent with efficiency in the market for audit committee chairs. This study also provides evidence that audit committee chairs respond to likely shareholder concerns by providing more concise duty-specific voluntary disclosure when their company has previously restated its financials. Finally, audit committee chairs provide increased voluntary disclosure specifically related to external audit oversight when high agency conflicts exist. As a whole, this contributes to the existing audit committee literature by providing evidence that voluntary disclosure incentives for financial reporting are also important determinants of more qualitative compliance-based reporting in the proxy statement. This has implications for accounting and governance practitioners as voluntary audit committee report disclosure offers shareholders detailed information that they may use in evaluating audit committee monitoring performance.

Audit committee voluntary disclosure describing external auditor oversight: Does it reflect higher audit quality?

AbstractThis study examines the association between audit committee voluntary disclosures related to external auditor oversight and audit quality of the top US bank holding companies for a period of 10 years. Using manual coding of the voluntary disclosures that target audit committee oversight of the external auditor, we find that audit committees with a higher level of voluntary disclosures delineating activities of external auditor oversight tend to have a higher audit quality. These results are consistent with the view that audit committees play a major role in overseeing the external audit process as was emphasized by the Sarbanes‐Oxley (SOX) Act. In the case of negligence or wrongdoing, audit committees can be sued for breaching due care; thus, voluntary disclosure is a reliable indicator of the audit committee effectiveness and oversight of the audit process. Using voluntary disclosures in the audit committee report, this research provides useful information to shareholders to evaluate the effectiveness of audit committees in monitoring the external audit process while answering previous calls to investigate the audit committee oversight process (and corresponding effect on audit quality) and not just focusing on audit committee characteristics such as size, expertise, experience, meeting frequency, and audit fees.

Pengaruh Corporate Governance Dan Pengungkapan Sustainability Report Terhadap Kinerja Keuangan

This study aims to determine the effect of corporate governance and the effect of disclosure sustainability report on the financial performance of companies listed on the Indonesia Stock Exchange for the 2017-2019 period. The process of collecting data using a purposive sampling method by obtaining 33 companies for 3 years of observation with 99 observations. The data in this study uses secondary data from annual financial reports and sustainability reports. This research is a quantitative research with data processing using Statistical Product and Service Solution (SPSS). The analysis process used is descriptive statistical analysis, classical assumption test, multiple regression analysis and then hypothesis testing. The independent variables in this study are corporate governance with proxies of the board of directors, independent commissioners, audit committee, and sustainability report. The dependent variable in this study is financial performance with ROE as a proxy. The results of the study show that corporate governance as proxied by the board of directors, independent commissioners, and the audit committee has no effect on financial performance, while the disclosure of sustainability reports has no effect on financial performance. 
 Keywords: Corporate governance, board of directors, independent commissioner, audit committee, sustainability report, ROE

Disclaimer language in US banks’ audit committee reports: determinants and consequences

Purpose This paper aims to investigate the determinants and consequences of using disclaimer language in the banks’ audit committee (AC) reports. This study aims to analyze the factors tempting AC members of banks to disclose disclaimer language in the AC reports and the effect of such language on the cost of equity. Design/methodology/approach The data cover the period from 2006 to 2015 and considers the top US bank holding companies. Voluntary disclosure in the AC report is manually coded by using a scoring grid. Multivariate regression analysis is mainly used in the study. Findings The findings suggest that the ACs are using the disclaimer language to protect themselves when disclosing a high level of voluntary information that describes their oversight activities or to reduce their liability exposure due to lower financial reporting quality. The findings also reveal that investors are requiring a higher return on their investments whenever ACs use disclaimer language in their reports. Originality/value The AC report provides useful information to shareholders who evaluate the AC’s performance and accordingly vote for or against AC members on annual basis. The paper sheds lights on the motives and consequences of disclaimer language in the ACs report. Thus, the study benefits shareholders by providing empirical evidence in regard to the usage of disclaimer language. Also, the findings benefit industry, corporate governance organizations, standard setters and regulators that analyze AC disclosures and issue recommendations or new standards for improving those disclosures.

Expanded Auditor's Report Disclosures and Loan Contracting*

ABSTRACTStarting in October 2013, auditors of premium‐listed firms in the United Kingdom are mandated to prepare an expanded auditor's report that provides details on audit procedures, risks of material misstatement (RMMs), and materiality thresholds. This regulatory change is important to study, because it aims to increase the informational value of the traditional, highly standardized, pass‐or‐fail auditor's report. We examine whether the disclosures in the expanded auditor's report provide information that is relevant for adopting firms' loan contracting terms in the post‐adoption period. Our results indicate that the introduction of the expanded auditor's report is associated with reduced loan spread and longer maturity for loan facilities of adopting firms relative to non‐adopting UK firms. When we focus on adopting firms in the post‐adoption period, we find that the number of “unique RMMs” mentioned in the auditor's report, but not in the audit committee report, are positively associated with loan spread but are not associated either with loan maturity or the number of lenders in the loan syndicate. Additional tests show that the benefits, in terms of a reduced spread, of having a lower number of “unique RMMs” accrue mostly to adopters with a poor information environment. Taken together, our results provide preliminary evidence that the expanded auditor's report disclosures contain relevant information for loan contracting in the United Kingdom. This study highlights the unique role of the expanded auditor's report in providing information relevant to lenders and supports standard setters' efforts to enrich its informational content.