Audit Committee Research Articles

THE IMPACT OF CAPITAL STRUCTURE ON THE APPLICATION OF CORPORATE GOVERNANCE IN JORDANIAN PUBLIC SHAREHOLDING INDUSTRIAL COMPANIES

Research Aims: This exmine the impact of capital structure on the application of corporate governance in Jordanian industrial companiese,by using the ratios of the capital structure on the size, independence of the board of directors,and independence, size of the audit committee. Design/Methodology/Approach: The population of the study consisted of 53 Jordanian Industrial Companies (JICs) registered in the Jordanian Securities Depository Center (JSDC), while the sample included 35 JICs that met the selection criteria. Data were collected from the JSDC’s website for the fiscal years 2017–2022. Whereas the hypotheses underwent multiple regression supported by SPSS. Research Findings: The study reached a set of findings, the most important of which was: There is an impact of capital structure on the application of corporate governance in Jordanian industrial companiese. Based on these findings, the study recommended several recomendations, the most important is increasing the level of commitment of Jordanian industrial companies to the terms and rules of corporate governance and disclosing this in their annual reports, as this will enhance their value and reputation in the market and thus increase their ability to attract investments and achieve high returns and sustainability in the long term. Theoretical Contribution/Originality: the study adds new evidence to the literature regarding the impact of capital structure on the application of corporate governance. Research Limitation/Implications: The lack of data for some companies during our study period. also the researchers used some ratios to measure the study variables because it is not possible to use all ratios in this study.

Optimizing Transfer Pricing in Indonesia: An exploring of Tax Minimization, Tunneling incentive, and Audit Committee

Transfer pricing has become a crucial aspect of global business, especially for natural resource companies in Indonesia, which includes monitoring tax compliance, mitigating tax dispute risks, and maintaining corporate reputation due to its complex and high-priced commodities. This research aims to test and analyze the direct influence of tax minimization strategy, tunnelling incentive, and bonus mechanism on transfer pricing decisions. Meanwhile, the indirect effect involves the audit committee as a moderating factor to explore their influence on transfer pricing practices. The data used in this research was derived from the annual reports of natural resource sector companies listed on the Indonesia Stock Exchange from 2020 to 2022. A total of 185 companies used the purposive sampling method, resulting in a sample of 146 data analyzed using WarpPLS 8.0. According to the research results, tax minimization directly influences transfer pricing. In contrast, tunnelling incentives do not affect transfer pricing, and audit committees moderate the influence of bonus mechanisms on transfer pricing.

A COMPARATIVE ANALYSIS OF CORPORATE GOVERNANCE DISCLOSURE PRACTICES: EVIDENCE FROM INDIAN AND GCC NATIONS

This paper makes a cross-sectional comparison of corporate governance disclosure trends in India and the GCC (Gulf Cooperation Council) countries. Benchmarking measures which include board of directors’ responsibility, audit committee efficiency and transparency, the study encompasses varied growth trend based on region. Local practices of Indian firms are relatively higher than global counterparts due to structured regulatory environment and focus on conformance to the established rules and regulation as well as international standards. Still, Gulf countries companies present more variations in terms of board accountability that has to do with difference in regulatory environment due to differences in economic and culture. Nonetheless, both regions experienced stable audit practices, and this shows that both sides are equally serious about how the financial aspect of their enterprises is managed. This underlines the call for improved governance discloser to, appeal investment from international markets and improve stakeholder confidence. Thus, some suggestions for future research include longitudinal research that will focus on the dynamics of governance in the periods of time and investigations of the differences across the countries of the wider emerging markets. This research provides lessons that the policymakers, investors and corporate leaders should consider while enhancing governance standards of firms to be in parity with the best international practices. KEYWORDS: Corporate governance, disclosure practices, transparency, board accountability, audit committee, emerging markets, India, GCC, regulatory frameworks, stakeholder trust

Disaggregating air, water and renewable energy disclosures in developing economies: the role of regulatory impact and board characteristics

PurposeThis study examines how board characteristics influence air, water and renewable energy (AWR) disclosures in an emerging economy. It argues for the necessity of separating these disclosures to address unique environmental impacts and stakeholder concerns.Design/methodology/approachUsing longitudinal data from environmentally sensitive firms (2014–2022), a disclosure index based on the Global Reporting Initiative (GRI) framework was developed to quantify AWR separately. To address potential statistical issues such as endogeneity and selection bias, the analysis employed a set of robust regression models, including the industry fixed effects (FE) model, a lagged model and a two-stage least squares (2SLS) model.FindingsBoard size and audit committees positively influence all AWR disclosures, while foreign directors significantly impact air and renewable energy disclosures. Board meetings negatively affect water disclosures. Surprisingly, board independence shows no significant impact, and gender diversity has no notable relationship. Post-amendment, firms increased AWR disclosures, though participation remains limited.Research limitations/implicationsGrounded in legitimacy theory, this study contributes to the literature by demonstrating how separating the unique characteristics of AWR disclosures offers stakeholders more precise insights into how firms manage specific environmental concerns. The findings are based on data from listed firms in Bangladesh and may not be generalisable to unlisted firms or other regions.Practical implicationsThe study emphasises the importance of distinct AWR reporting, offering valuable insights for regulators and corporate boards to improve transparency and sustainability practices.Social implicationsSeparating AWR disclosures provides stakeholders with clearer assessments of firms' environmental performance, promoting accountability and informed decision-making.Originality/valueThis study uniquely emphasises the need for disaggregating air, water and renewable energy disclosures in emerging economies. By focussing on each environmental issue separately, the research highlights how distinct disclosures offer clearer insights into how firms address specific environmental challenges, such as air pollution, water management and the transition to renewable energy sources. This disaggregation is essential for stakeholders – particularly regulators, investors and policymakers – to assess and respond to firms' sustainability efforts accurately.

Corporate Governance, ESG, Audit Committee and Financial Performance in European Investment Holding Companies

The purpose of this research paper is to explore the connection between Corporate Governance, Environmental, Social and Governance (ESG), Audit Committee (AC) and Financial Performance in European Investment Holding Companies. This paper aims to understand whether there is a correlation between these elements. The study answers the following research question: "What is the impact of corporate governance indicators, ESG and financial performance on investments in public holding companies in Europe?" Our findings reveal significant correlations between corporate governance structures and financial performance metrics, as well as the influence of ESG ratings on financial performance and corporate governance. Additionally, we identify the effects of audit committee characteristics on financial performance and ESG outcomes. The reported data is collected from a sample of companies included in the Refinitiv Eikon Database and analysed using a panel data analysis at both regional and industry level. The sample is composed of 228 European Companies, covering a period of 4 years, from 2019-2022. I chose this because it includes the impact of the pandemic and the post-pandemic recovery period, providing insight into the adaptability and resilience of companies in the face of major economic challenges.This research contributes to a deeper understanding of the dynamics between corporate governance, ESG practices and financial performance, providing valuable insights for investors, managers and regulators aiming to navigate sustainable investment strategies in the European market. This sample is considered large enough to provide meaningful data and draw relevant conclusions. Companies from various European countries were included to reflect the diversity of the market and to analyse variations in governance and ESG practices in different national contexts. The focus on public holding companies provides a specific perspective on how these entities manage corporate governance and ESG, given their importance in the European economy. The selection of the sample was based on the availability of financial and corporate governance data to ensure the reliability and validity of the analysis. This data will be used to investigate how governance and ESG practices influence companies' financial performance, thus providing important insights for understanding the relationship between these aspects within the European market.

The Importance of Governance and Audit Committee in ESG Reporting Within the Aerospace Industry

In the context of the global situation, against the backdrop of a rather marked instability and perhaps inappropriate behavior of mankind in recent times, as well as climate instability, the study aims to analyze the relationship between the presence of corporate governance, the existence and expertise of the AC as well as reporting on environmental, social and governance (ESG) indicators within the aerospace industry globally, taking into account long-term environmental objectives at global level, such as net carbon emissions to tend towards zero by 2050. The data analyzed were extracted from the Refinitiv Eikon database using, globally, from which a sample of 368 public companies in the aerospace industry was extracted, analyzed over a period of 4 years, respectively 2019-2022. As a methodology used in the research, a linear regression model was used, analyzing the linear relationship between the existing corporate governance dependent variable and the independent variables: the existence of the AC, the AC's expertise and the ESG score. This research contributes to the literature on the reporting of indicators (ESG) by aerospace companies, in which regulators do not play a dominant role in determining the degree of disclosure. Probably, in the future it will be necessary for most companies to realize that transparency in reporting contributes to a balance in the world and humanity would benefit if the polluters would reduce their intensity. In conclusion, corporate governance and the AC can play a key role in the effectiveness of ESG indicators reporting in the aerospace industry, which would lead to sustainable practices and contribute to the industry's efforts to address global environmental challenges.

Does Corporate Governance Moderate the Relationship Between Earnings Management and Financial Performance?

Motivation: This study aims to fill the gap in the corporate governance literature by examining the moderating role of corporate governance on earnings management and financial performance. Idea: The research is conducted in the light of agency and legitimacy theories, looking through how corporate governance practices moderate the relationship between earnings management and financial performance. Data: The database consists of an international sample of non-financial companies, for the time frame between 2020 and 2023. The data are collected from Thomson Reuters Eikon, and the analysed period responds to a thorough approach of the topic under problematic circumstances. In line with prior literature, this analysis includes several corporate governance mechanisms such as number of board meetings, board gender diversity, board size, CEO duality, independent board members, and audit committee independence. Among the control variables could be mentioned firm size, financial leverage, and profit or loss. Corporate governance is examined as a key driver in achieving financial performance, maximising the value created by companies and strengthening their connections with stakeholders. Tools: To test the research hypotheses, investigation is performed through frequency and descriptive statistics, parametric correlations, complemented with panel regression analysis with random effects performed in STATA 18 software. Findings: According to the results, there is strong evidence that financial performance is impacted by earnings management, at the corporate level. Notably, the main findings suggest that board meetings, board size, and board independence may be underlying factors in reducing the adverse effects of earnings management reflected in financial performance. Likewise, corporate governance may contribute to an effective monitoring of earnings management. Muchmore, the findings are in line with the agency theory, which asserts that corporate governance practices lessen managerial resource exploitation necessary for sustainable development and financial performance. Contribution: Relevance of the study resides in grounding a comprehensive overview in the earnings management and sustainability literature, examining corporate governance patterns. This research contributes to the debate of influence exerted by earnings management practices on financial performance extended towards a better understanding of corporate governance outcomes.

Can audit committees’ environmental background promote corporate green innovation? Evidence from China

ABSTRACT Identifying potential driving factors for corporate green innovation is vital in promoting global green development. This study aims to examine whether the environmental background of the audit committee promotes corporate green innovation and the mechanisms involved. Based on this perspective, we empirically test a research sample of Chinese A-share market-listed companies from 2007 to 2022. The results reveal that, first, the audit committee’s environmental background can significantly promote green corporate innovation. Second, the audit committee promotes green innovation by enhancing the environmental awareness of the management, increasing substantial environmental investments, and fostering environmental compliance; this effect is more pronounced in companies characterized by significant media attention and considerable involvement of the audit committee in governance. Third, green innovation can significantly enhance economic and environmental performance, although it delays its impact on short-term economic performance. The conclusions of this study provide new empirical evidence for corporate governance optimization and green innovation, and offer decision-making insights for enterprises to implement green innovation strategies for sustainable development.

Determinants of Audit Committee Effectiveness in Ghana's Public Sector: A Focus on Committee Membership Characteristics

Determinants of Audit Committee Effectiveness in Ghana's Public Sector: A Focus on Committee Membership Characteristics

An audit of the adherence to dosing and therapeutic monitoring of intravenous vancomycin in accordance with the trust’s antimicrobial guidelines

Abstract Introduction Inappropriate vancomycin dosing and monitoring have compromised patient safety, causing acute kidney injury and prolonged hospital stays. Misuse of antibiotics, like vancomycin, accelerates resistance, a global health threat. Following guidelines can prevent harm and curb the emergence of vancomycin-resistant enterococci and resistant Staphylococcus aureus1. Aim To assess the level of adherence to trust guidelines for the dosing and monitoring of intravenous vancomycin. Audit Standards Standard 1: Patients prescribed intravenous vancomycin should have documented indication Standard 2: Patients prescribed intravenous vancomycin should have correct loading dose Standard 3: Patients prescribed intravenous vancomycin should have correct maintenance dose Standard 4: Patients prescribed intravenous vancomycin should have trough levels taken at the right time Standard 5: Patients prescribed intravenous vancomycin should have doses accurately adjusted against trough level Results: Standard 6: Patients prescribed intravenous vancomycin should have all prescribed doses administered (i.e. no missed doses). Standard 7: Vancomycin prescriptions should be screened by a pharmacist. Methods This audit was approved by both the Trust Clinical Audit Committee and the Antimicrobial Stewardship Group. A retrospective audit using data extracted from EPMA. The data collected included: indication documented (Yes/No), correct loading dose? (Yes/No), missed doses? (Yes/No), correct maintenance dose? (Yes/No), correct first sampling? (Yes/No), correct subsequent sampling? (Yes/No), correct dose adjustments based on levels? (Yes/No) and prescription screened by a pharmacist? (Yes/No). Data was input into Microsoft Excel for analysis. The period covered was 01/12/2022 to 31/05/2023. Ethics approval was not required, as clinical audits do not require ethical review. The inclusion criterion was adult patients prescribed intravenous vancomycin. The exclusion criteria were patients in maternity, labour, and renal wards, due to different guidelines and ITU due to no EPMA. The population size was 243; sample size (n) =150 ensuring a 95% confidence level. Results In total, 150 patient drug charts were analysed, of which 96 % had their vancomycin indication documented. 65.3% of patients had the correct loading dose, 64.7% had the correct maintenance dose. 32.23% had the initial trough level done at the right time and 35% had correct subsequent trough levels measured. 44% had correct dose adjustments based on their trough levels and 57.33% had their prescriptions screened by a pharmacist. Discussion and conclusion None of the target compliance rates were met, highlighting significant issues with vancomycin dosing and therapeutic monitoring within the trust. Therapeutic drug monitoring (TDM) is crucial to ensure optimal patient outcomes2. Audit findings have been shared with the wider multidisciplinary team, education on TDM has taken place with junior pharmacists and digital prompts on EPMA have been included to help improve adherence. A limitation of this audit is its retrospective nature, useful for trend analysis but not for identifying causes. A prospective audit was not feasible due to staffing pressures. Conducting clinical audits are an important tool for assessing and ensuring safe clinical practice.

The Influence of Corporate Governance on Tax Avoidance and The Role of Independent Auditors in Vietnamese Firms

This research addresses how corporate governance mechanisms influence tax avoidance in Vietnamese firms and the role of independent auditors in detecting or mitigating tax avoidance. The purpose of the research is to explore the relationship between corporate governance structures (e.g., independent boards, audit committees) and tax behavior, as well as to assess how auditors interact with these governance mechanisms to ensure tax compliance. A qualitative case study approach was used to analyze six companies from different sectors and governance models (2 state-owned enterprises; 2 family-owned private companies; and 2 publicly listed companies) through 18 interviews conducted between May 2024 and October 2024 with 3 key individuals from each company, including: Independent auditor; Company CEO; Manager or administrator, along with documentary analysis of financial statements and tax filings. The research found that firms with stronger governance (e.g., independent boards and active audit committees) are less likely to engage in tax avoidance, while weak governance structures often lead to more aggressive tax strategies. Independent auditors were more effective in well-governed firms, but faced ethical challenges in weaker ones. These findings are significant because they highlight the importance of strengthening governance frameworks and ensuring auditor independence to reduce tax avoidance and improve corporate transparency in Vietnam.

CEO Connectedness and Firm Transparency

ABSTRACTOur research reveals that CEO connections with Audit Committee directors, established through past employment, education, or social organization memberships, significantly impact firm transparency. These connections increase the likelihood of firms issuing less transparent and readable financial reports. Furthermore, these connections are linked to decreased long‐term firm value and increased crash risk. Our findings underscore the crucial role of CEO connectedness in corporate disclosure transparency and firm value. We employed multiple methodologies to address endogeneity concerns. Our results remain robust.

Audit committee financial expertise and internal control weakness: does CEO overconfidence matter?

Purpose The presence of financial experts within audit committees (AC, hereafter) has been a central concern for regulatory bodies. These guidelines underscore the significance of having members with distinct financial acumen and proficiency on AC. The primary objective of this research is to explore the influence of financial expertise within AC on internal control weaknesses (ICWs, hereafter). Furthermore, another aim of this study is to examine the potential combined impact of CEO overconfidence on this correlation. Design/methodology/approach The statistical analysis has been done through the implementation of a multiple regression model by adopting a sample of 82 Jordanian companies, chosen from the years 2014 to 2020. Findings This research reveals that an AC with higher levels of financial expertise is linked to fewer ICWs. Upon further examination, this paper observes that this negative impact is primarily driven by the presence of accounting expertise, as opposed to nonaccounting expertise. It is also evident that CEOs with overconfidence may interfere with the decision-making processes of the audit committees, thus compromising the internal controls even though the committee is financially and accountancy literate. Originality/value This research distinguishes between accounting and nonaccounting financial experience in AC and shows that accounting experience significantly reduces internal control problems. In addition, it introduces CEO overconfidence as a moderating variable, which provides new insights into the field of corporate governance. The implications of these findings are far-reaching in enhancing transparency, trust and accountability by enhancing the quality of internal control.

Audit Committee as a Corporate Governance Mechanism with the Firm Financial Performance in Saudi Arabi

Audit Committee as a Corporate Governance Mechanism with the Firm Financial Performance in Saudi Arabi

Karakteristik Komite Audit dan CSR Disclosure di Infrastructure- Konstruksi Non BUMN

This research empirically tests the influence of audit committee characteristics, namely audit committee independence, audit committee size, expertise, audit committee finances, audit committee meeting frequency, audit committee gender differences on the quality/extent of corporate social responsibility disclosure for the 2018-2022 period. The dependent variable used in this research is the extent of corporate social responsibility disclosure. This research uses quantitative research methods with secondary data obtained from annual reports of non-BUMN infrastructure and construction industry companies listed on the IDX. There are 150 data from 30 companies selected as research samples based on the purposive sampling method. Data processing in this study was tested using Eviews 12 Student Version Lite. The results of this research show that the independence of the audit committee, the financial expertise of the audit committee and the frequency of audit committee meetings have a significant positive effect on the extent of CSR disclosure. Meanwhile, audit committee size and audit committee gender differences have no influence on the extent of CSR disclosure.

Pengaruh Asimetri Informasi, Financial Distress, dan Good Corporate Governance terhadap Manajemen Laba

This study aims to test and prove empirically the effect of information asymmetry, financial distress, managerial ownership, and audit committee on earnings management. The population used is all annual reports of infrastructure companies in the building construction sector listed on the Indonesia Stock Exchange for the period 2018-2022, with a total sample of 12 companies. The test method uses partial least square (PLS) which is processed with SmartPLS for Windows Version 3.0. The results showed that information asymmetry, financial distress, managerial ownership, and audit committee have a positive and significant effect on earnings management.

ESG performance and the cost of debt: exploring the role of internal audit

ABSTRACT This study investigates the effect of Environmental, Social, and Governance (ESG) performance on capital-raising costs in the debt market. The study also examines the role of internal audit organizations in this relationship. The results of the current study show that firms with high ESG performance have lower cost of debt. More importantly, when ESG is classified into sub-factors (E, S, and G), all three are negatively associated with the cost of debt. Next, the current study documents that the presence of an audit committee, the increase in the number of internal audit members, and the higher independence of the internal audit organization incrementally weaken the negative relationship between ESG and the cost of debt. The results remain robust across various additional tests and when endogeneity concerns are mitigated. Overall, these findings suggest the possibility that, as a primary risk assessment function, an independent and large internal audit organization exposes and highlights ESG risks to external credit rating agencies. The findings of this study offer valuable practical insights into how internal audit organizations can effectively assess and contribute to the evaluation of ESG performance.

The impact of the Board of Directors and the Audit Committee on the transparency of financial information of companies listed in a Frontier market

This study aims to evaluate the impact of factors representing the Board of Directors (BOD) and Audit Committee (AC) on financial information transparency (FIT) in a frontier market. FIT is measured through three indicators that reflect financial non-transparency: earnings aggressiveness (EA), earnings smoothing (ES) and loss avoidance (LA). Research data was collected from 338 companies listed on the Vietnam Stock Exchange (HOSE and HNX) from 2012 to 2022. The study uses the panel data analysis method through OLS, FEM, REM regression steps and necessary tests to select the appropriate analysis model. At the same time, model defects are handled by GLS and Robust regression. Our findings show that the factor representing BOD tends to increase the transparency of financial information, while the factor representing AC tends to decrease the transparency of financial information. This is the first study to examine the impact of composite factors representing BOD and AC and their component factors on FIT.

The Effect of Profitability and Good Corporate Governance Mechanisms on the Timeliness of Annual Financial Report Publication: An Empirical Study on the Infrastructure, Utilities, and Transportation Subsector Companies Listed on the Indonesia Stock Exchange for the period 2020 - 2022

This study aims to determine the effect of profitability and the mechanism of Good Corporate Governance, as proxied by the independent board of commissioners, managerial ownership, and the audit committee, on the timeliness of annual financial report publication. The study uses companies from the infrastructure, utilities, and transportation sub-sectors listed on the Indonesia Stock Exchange for the period 2020-2022. The data analysis technique used is purposive sampling. The sample in this study consists of 27 companies. The data analysis technique used is multiple linear regression. The results of this study show that profitability and the independent board of commissioners do not affect the timeliness of the annual financial report publication. Managerial ownership and the audit committee do affect the timeliness of the annual financial report publication.

The relationship between audit committees, external auditors, and internal control systems: a literature review and a research agenda

Purpose This paper aims to focus on the relationship between audit committees, external auditors and internal control systems (ICS) and strives to point out mutual influences between the instances to provide an integrated perspective for firms’ multilateral monitoring mechanisms. Furthermore, this study emphasizes the incorporation of sustainability and fraud considerations into the traditional roles of audit committees and auditors. Design/methodology/approach This structured literature review is based on 71 empirical-quantitative studies published in high-quality journals between 2005 and 2022. Considering the classification of ICS into ICS quality and internal audit function, the studies are analyzed with regard to audit committees’ and external auditors’ characteristics, divided into incentives and competencies, as well as their mutual relationships. Findings This study highlights a dynamic trilateral network of relationships between monitoring authorities and primarily shows that audit committees equipped with adequate competencies generate a substitutive effect for external auditors by reducing their efforts, whereas ICS quality serves as a possible mediator in this network of relationships. The establishment of an integrative three-party coalition of competent and adequately incentivized monitoring parties is essential to guarantee sufficient and appropriate ICS and overall corporate governance quality. Practical implications The findings should prompt legislators and firms to ensure a deeper collaboration between audit committees, internal auditors and external auditors to generate synergy effects and economies of scale within the integrative monitoring process. Legislators should develop stricter requirements for competencies of audit committees and auditors. These should include a holistic triad of sustainability, fraud and digital expertise as well as mandatory forensic procedures performed by all monitoring bodies. Originality/value The authors contribute to prior research by highlighting the importance of an integrative three-party coalition of monitoring authorities to ensure corporate governance quality and to generate synergy effects within a dynamic multilateral monitoring process. Furthermore, the authors offer cutting-edge implications by stressing the need for consideration of sustainability and fraud aspects in the traditional work and profiles of audit committees and auditors.