Audit Committee Independence Research Articles

Earnings Management Detection: The Effect of Good Corporate Governance and Executive Compensation (Comparison of Jones Model with Dechow Model)

The purpose of this study is to analyze the effect of the Independent Board of Commissioners, Independent Audit Committee, Managerial Ownership, and Executive Compensation on earnings management in the company, by comparing the effectiveness of the Jones Model and the Dechow Model in detecting discretionary accruals because there are inconsistencies between the two models. The population of this study are food and beverage companies listed on the Indonesia Stock Exchange (IDX) during the period 2019 to 2023. The sample selection was carried out using a purposive sampling method, namely sampling based on predetermined criteria, including companies that are consistently listed on the IDX, have complete annual reports, are not from the financial sector, and have complete data on the independent board of commissioners, independent audit committee, and executive compensation. The method used is a quantitative method that focuses on collecting and analyzing numerical data to explain certain phenomena. The results showed that Good Corporate Governance (GCG) and Executive Compensation have no significant effect on Earnings Management. This study also compares the ability of the two models to identify discretionary accruals that reflect earnings manipulation practices by management. The results of the analysis show that the Dechow Model, which modifies the Jones Model approach by considering changes in accounts receivable, provides more accurate and consistent results in detecting earnings management than the Jones Model. Therefore, companies need to strengthen governance by increasing the proportion of independent commissioners, audit committees, and managerial ownership, and designing executive compensation structures that reduce incentives to perform earnings management.

Bridging Profitability and Sustainability: Insights from Carbon Emission Disclosures and Governance Practices

Background: This study investigates the impact of Good Corporate Governance (GCG), profitability, and carbon emission disclosure on firm value in the mining sector listed on the Indonesia Stock Exchange (IDX) from 2019 to 2022. The mining sector's significance in Indonesia's economy and the growing importance of sustainable corporate practices provide the context for this research. Methods: The study employs multiple regression analysis to analyze data from 11 mining companies. The variables include GCG mechanisms (managerial ownership, institutional ownership, independent commissioners, and audit committees), profitability (measured by Return on Assets), and carbon emission disclosure. Firm value is proxied by Tobin's Q. Results: The findings indicate that profitability has a positive and significant impact on firm value. However, GCG mechanisms such as independent commissioners and audit committees have negative effects on firm value. Carbon emission disclosure does not significantly influence firm value. Conclusion: The study highlights the importance of profitability in driving firm value but also underscores the need for effective GCG mechanisms and greater emphasis on environmental responsibility. The results contribute to the discourse on sustainable corporate practices and their implications for investor confidence, emphasizing the necessity of balanced approaches that integrate financial performance with environmental sustainability.

How the Corruption and Predictors of Audit Structure Impact the Firm Performance in Developing Economy?

Corruption remains the core issue in developing economies. In the last decade of the 20th century three elected governments were dismissed in Pakistan on account of malpractices and corruption. Present study evaluated the effect of corruption on performance of listed firms first time in the context of Pakistan. The results showed that corruption positively affects the performance of the firm measured by Tobin’s Q. The results revealed that payment of extra money to corrupt government officials to enter social networks and to enjoy the tax benefits, speedy transaction processes and relaxed regulator supervision have positive effect on firms’ performance. The results support the corruption theory of ‘Grease in Wheels’. This study also examined the impact of Audit Independence and External Audit Quality on performance of listed firms. The results showed that audit committee independence has a statistically significant and positive impact on firm market value whereas the impact of external audit quality is insignificant on market performance of the firm. The results necessitate anti-corruption measures for the development of the performance of the listed firms. Results also suggest the presence of good corporate governance practices improve the firm’s performance. The present study used data of 86 companies of commodity sectors listed on Pakistan Stock Exchange for 13 years from 2008 to 2020. Generalized Method of Moments (GMM) is used for analysis.

Demystifying the nexus of audit committee characteristics and sustainability performance

PurposeTo scrutinize the role of audit committee characteristics (i.e. audit committee independence, audit committee expertise and audit committee tenure) in attaining sustainability performance (i.e. environmental, social and governance performance).Design/methodology/approachUsing a sample comprising 1,304 firm-year observations from Indian listed firms from 2018 to 2024, the current study performs baseline, robustness, additional and heterogeneity tests to examine the effect of audit committee characteristics on the environmental, social and governance performance.FindingsOur findings reveal that audit committee independence and expertise are vital for achieving sustainability performance. Also, our results indicate that independence and expertise in audit committees reflect more inclination for environmental performance and governance performance than social performance. The outcomes further state that the audit committee tenure does not impact sustainability performance. Our results remain robust even after using different estimators. Additionally, the above findings are similar for industry-wise outcomes as well as during the COVID-19 phase and post-phase of the COVID-19 pandemic.Originality/valueOur study makes a practical contribution by pioneering the attributes of audit committees in achieving sustainability performance from an emerging country perspective, such as India, which has not yet been done. The study holds great importance for managers, environmental activists, regulators and policymakers, reinforcing the belief that audit committee characteristics can be utilized in formulating policies for sustainability initiatives.

Determinants of Earnings Management: The Moderating Role of Firm Size

This study aims to provide empirical evidence on the impact of financial distress, financial ratios, and corporate governance on earnings management, using company size as a moderating variable. This study focuses on real estate, construction, and property companies listed on the Indonesia Stock Exchange (IDX) between 2020 and 2022, with a sample of 54 companies selected through purposive sampling. Data analysis was conducted using multiple linear regression to test the direct effect of independent variables on earnings management and interaction test to evaluate the moderating role of firm size. The research findings show that financial distress affects earnings management, which suggests that companies under financial stress are more likely to rely on earnings management to present favorable earnings performance. In contrast, financial ratios do not affect earnings management, which suggests that well-performing firms are less likely to engage in the practice. Good corporate governance, represented by the proportion of independent directors, audit committee and managerial ownership, also affects earnings management. In addition, firm size moderates the relationship between financial distress and earnings management, with larger firms showing a greater tendency towards earnings management when facing financial challenges. These results underscore the importance of considering financial conditions and firm size when monitoring earnings management, as larger firms may be more prone to earnings management practices under certain conditions.

Shareholder Pressure, Independent Audit Committee and Sustainability Reports

Shareholder Pressure, Independent Audit Committee and Sustainability Reports

Mastering Corporate Integrity: The Dynamic Relationship Between Board Independence and Financial Quality

The quality of financial reporting is increasingly scrutinized in the context of corporate governance, particularly with respect to board independence. This study explores the relation among board independence and financial reporting quality, an area of growing interest as stakeholders demands greater transparency in corporate financial practices. Board independence is hypothesized to increase the quality of financial reporting by mitigating conflicts of interest and increasing accountability. This research employs a bibliometric approach to review 66 journal articles published between 1995 and 2020, focusing on the social sciences and business disciplines. Using the bibliometric 3.0 package in R-studio, we carry out a comprehensive bibliometric analysis to identify key sources, influential authors, and the evolution of research themes. Our findings indicate a rising focus on the impact of board independence on financial reporting, with significant attention to the role of independent audit committees and the importance of diversity in board composition. We also observe an increasing number of studies on how board independence affects company transparency and earnings management. This paper offers important implications for policymakers, investors, and corporate governance researchers, emphasizing the need to strengthen board independence practices to enhance financial reporting quality and corporate transparency.

Corporate Governance and Accounting Conservatism: Exploring the Linkages and Implications

This study examined the correlation between the corporate governance mechanism and accounting conservatism during the COVID-19 pandemic. In this paper, we employed regression analysis to examine the relationship between several aspects of corporate governance and accounting conservatism, including board independence, audit committee independence, CEO duality, multiple directorships, ownership concentration, and board metric. This study investigates how the COVID-19 pandemic and the adjustments to the Malaysian Code on Corporate Governance (MCCG) 2017 affect the performance and earnings quality of Main Board companies listed on Bursa Malaysia in 2020. Financial and governance data were collected from annual reports and Refinitiv DataStream using a quantitative approach. The first proxy for earnings quality was accounting conservatism, measured by the Khan and Watts (2009) model. Using regression analysis, the study explained how corporate governance mechanisms prevailed over conservatism during the pandemic and how it impacted accounting practice and decision making under increased uncertainty. This study revealed that conventional governance mechanisms for example, board independence, audit committee independence and CEO duality do not affect accounting conservatism. However, board metric, which measures the dispersion and the experience of the board, is positively and significantly related to accounting conservatism. Moreover, the results of this study suggest that the size and profitability of the firms increase the likelihood of using conservative accounting policies. The findings of the study indicate that during crisis period, organizations more extensive governance structures and diverse knowledge are in a vantage position to apply accounting conservatism, which is crucial for ensuring the reliability and credibility of financial reports.

The board gender, audit committee features, and social disclosure: Corporate governance practices from emerging markets

This study aims to analyze the empirical testing of four hypotheses, i.e., the influence of the independent board of directors, the board gender, the independent audit committee, and the audit committee features on the extent of social disclosure. This study was conducted on companies listed on the Indonesia Stock Exchange (IDX) in the mining and energy industries, totaling 63 companies. Out of these, 55 companies met the criteria to be included in the unit of analysis. The data analysis then used ordinary least squares (OLS). The study results found that independent board of directors, independent audit committee, and audit committee features have a significant effect on the extent of social disclosure. Meanwhile, board gender has no significant effect on the extent of social disclosure. The results of testing this hypothesis also imply that the existence of an independent party, both on the board of commissioners and the audit committee, is urgently needed. They use an independent, professional, and non personal interest attitude in their assignments. In addition, the existence of gender in the audit committee is essential to improve oversight of disclosure.

THE EFFECT OF PROFITABILITY, CORPORATE SOCIAL RESPONSIBILITY, CORPORATE GOVERNANCE MECHANISMS, AND FIRM SIZE ON DEBT POLICY

Good corporate governance practices can provide additional trust to external parties and investors, especially in corporate debt policy. This research aims to investigate the relationship between profitability, corporate social responsibility, corporate governance mechanisms, and firm size on corporate debt policy. The research method used is quantitative analysis using ordinary least squares and robust regression on data from companies listed on the Jakarta Islamic Index from 2017 to 2022. The results showed that profitability and an independent audit committee significantly negatively affect debt policy, while corporate social responsibility, independent commissioners, and firm size have a positive impact on debt policy. These findings provide important insights for companies in making smart debt policy decisions by business dynamics. The study also confirms the importance of agency theory in explaining how such elements help resolve conflicts of interest between management and shareholders, as well as enhance honesty, transparency, and better risk management in financial decision-making. By strengthening corporate governance and enhancing corporate social responsibility, companies can reduce the risk of conflicts of interest, increase integrity, and promote transparency in financial decision-making. This not only creates a more ethical working environment but also strengthens relationships with investors and society.

Impact of Corporate Governance on Performance of Public Commercial Banks in Nepal

With regard to non-performing loans in Nepal, this research study seeks to investigate the effect of corporate governance on the profitability of public commercial banks. While several studies have examined the "Impact of Corporate Governance on profitability of commercial banks in Nepal," publicly traded commercial banks in the country have been the subject of far less investigation. By focusing just on Nepal's banking sector, this research aimed to address that void. The non-performing loan (NPL) is used as a dependent variable to measure performance, while the percentage of female directors, audit committee size, audit committee independence, board diligence, and board size all serve as independent variables in corporate governance. The study examined the governance procedures and their influence on the performance of public commercial banks in Nepal using panel data analysis. The data was collected from 2017/018 to 2021/022, and statistical methods such as descriptive statistics, correlation, multiple regression, and t-test were employed. Board diligence (DB) significantly and positively affects nonperforming loans (NPL), according to the empirical findings. Other factors (BS, FD AC, BI, ACI) did not significantly affect the return on assets (ROA) of Nepal's public commercial banks, according to the results.

The impact of audit committee features on environmental and community disclosure – empirical evidence from GCC countries

This study examines the extent of environmental and community disclosures and evaluates how audit committee features influence such disclosures among listed firms in Bahrain and Kuwait, Gulf Cooperation Council (GCC) countries of emerging markets. The research employs an unweighted disclosure index comprising 18 items related to environmental and community disclosures, analyzing 432 firm-year observations across Bahrain and Kuwait covering a nine-year period (2015–2023). Three audit committee features (independence, number of meetings, and size) along with the number of other board committees are examined in this empirical investigation. Descriptive analysis indicates that the sampled firms offer 44.25% and 60.60% of environmental and community information, respectively, signaling a satisfactory disclosure level in Bahrain and Kuwait. This demonstrates progress compared to prior studies in GCC countries. Hierarchical Multiple Regression models demonstrate that all four models significantly describe the dependent variables. Regression model four exhibits the highest explanatory power in explaining community information. Audit committee independence and size emerge as determinants of community information, while only audit committee independence is associated with environmental information. The results of this study bear significant implications for governmental bodies and regulatory authorities aiming to strengthen disclosure regulations and promote corporate governance frameworks within GCC nations.

The Impact of Corporate Social Responsibility Disclosure on the Share Price of Mining Companies

The aim of this research is to examine the impact of Corporate Social Responsibility Disclosure, Independent Commissioners, and Independent Audit Committees on stock prices. The study focuses on mining companies that were listed on the Indonesia Stock Exchange between 2020 and 2022. A purposive sampling method was employed to select the sample. For data analysis, multiple linear regression analysis, t-tests, and descriptive analysis were utilized. According to the findings of the research, 1. The disclosure of Corporate Social Responsibility related to CSR-Economics demonstrates a positive but non-significant effect on stock prices. 2. The CSR-Environment aspect within Corporate Social Responsibility disclosures shows a significant positive impact on stock prices. 3. The CSR-Social component in the disclosure of Corporate Social Responsibility also has a significant positive influence on stock prices. 4. The presence of Independent Commissioners has a positive but non-significant effect on stock prices. 5. The Independent Audit Committee significantly positively influences stock prices.

Quality Audit: Audit Committee Independence, Accounting Expertise And Financial Expertise

Penelitian ini bertujuan untuk mengkaji dampak karakteristik komite audit yaitu independensi, keanggotaan keahlian akuntansi dan keanggotaan keahlian keuangan komite audit terhadap kualitas audit. Studi ini menganalisis pengaruh independensi komite audit, keahlian akuntansi dan keahlian keuangan komite audit terhadap kualitas audit Perusahaan Manufaktur yang terdaftar di BEI selama periode 2018-2023. Dengan menggunakan Eviews 12 dalam analisis statistik, Regresi data panel adalah metode analisis yang digunakan dengan pendekatan GLS (Generalized Least Squared), penelitian ini menemukan bahwa independensi komite audit memiliki pengaruh terhadap kualitas audit. Hal ini diartikan bahwa semakin banyak anggota komite audit yang independen maka semakin tinggi kualitas audit. Keahlian akuntansi dan keahlian keuangan tidak ditemukan pengaruh terhadap kualitas audit. Hasil penelitian ini memiliki implikasi bahwa pentingnya independensi komite audit dalam mempertahankan independensi dan skeptisisme auditor eksternal sehingga kualitas audit dapat meningkat. Studi ini memberikan temuan bahwa baik keahlian akuntansi dan keahlian keuangan komite audit memberikan sedikit kontribusi dalam intesitas audit. Penelitian ini berfokus kepada komite audit yang memiliki anggota yang ahli akuntansi dan ahli keuangan yang merupakan disiplin ilmu yang berbeda sehingga dapat melihat bagaimana pengaruhnya. Selain itu, Pengujian data dilakukan dengan menggunakan metode balance data panel sehingga data memiliki unit cross-section dan jumlah observasi time series yang sama.

Determinants of Audit Report Lag in Indonesia

<p><em>Financial statements are a very important part of the company, especially for public companies. Users of financial statements are very broad, ranging from internal managerial as performance measurement and decision making to investors and creditors. The purpose of this study was to determine and analyze empirically the effect between audit committee size, independent audit committee, audit committee expertise, and diligent audit committee with audit report lag. This type of research is quantitative research. The data analysis method in this study uses the Smart Equation Model Partial Least Square (SEM-PLS). The variables that will be observed in this study are audit committee size, audit committee independence, audit committee expertise and audit committee diligence as independent variables, while audit report lag is the dependent variable. Company size, profitability, KAP reputation are used as control variables in 78 property sector companies listed on the Indonesia Stock Exchange in 2021-2022. The results of this study provide empirical evidence that good GCG implementation can have an impact on audit report lag.</em></p>

Corporate governance structures and their implications on audit quality: UK evidence

This study evaluates the impact of corporate governance variables on audit quality in the United Kingdom (UK). The aim of the study is to ascertain the influence of board size, chief executive officer’s (CEO) dual role, and audit committee independence on audit quality. Two different proxies of audit quality were employed: the level of discretionary accruals and auditor size. The sample comprised 1,306 firms listed on the FTSE All Share Index for a long period covering 2012–2022. Different methodologies were employed to reach conclusions. Panel least squares and logit regressions provided robust results. Specifically, the results imply a positive relationship between board size, audit committee independence, and audit quality. Interestingly, CEO duality does not seem to alleviate audit quality levels. Contrary to many research findings and regulatory concerns, the CEO’s dual role is positively related to both audit quality proxies. All independent variables in the panel least squares model are statistically significant at conventional significance levels. The logit model provides unequivocal support to the beneficial role of board size on audit quality, at all levels of significance (p-value 0.00). The UK’s “comply or explain” regime offers a unique setting for future research on several corporate governance variables.

Pengaruh Good Corporate Governance terhadap Manajemen Laba pada Perusahaan Sektor Kesehatan

Good corporate governance (GCG) is an important aspect in corporate management, especially in the healthcare sector. This is because good Good corporate governance (GCG) practices can affect the transparency and accountability of financial reports, as well as reduce the tendency of earnings management. The risk of earnings management is often used in the face of pressure to maintain stable and attractive financial performance for stakeholders. This study aims to analyze the effect of good corporate governance on earnings management in healthcare sector companies. This study uses a quantitative approach with an explanatory research to test the effect of Good corporate governance (GCG) on earnings management in health sector companies listed on the Indonesia Stock Exchange (IDX) in 2021-2023. The results obtained from this study are independent commissioners, managerial ownership, institutional ownership do not have a significant effect on earnings management. While the audit committee has a significant effect on earnings management. Independent commissioners, managerial ownership, institutional ownership and audit committees simultaneously have a significant effect on earnings management.

Pengaruh Komisaris Independen Dan Komite Audit Terhadap Audit Delay (Studi Kasus Pada Indeks Saham LQ-45 Yang Terdaftar Di Bursa Efek Indonesia Tahun 2019-2021)

Based on the tests that have been carried out by the researchers using the requirements analysis test using the requirements analysis test (descriptive statistical analysis and normality test), testing the classical assumptions regression requirements using (multicollinearity test, autocorrelation test, heteroscedasticity test) and hypothesis testing using (t test , F test and R2 determination test) the results show that the independent commissioner has a positive and significant effect on audit delay and the audit committee also has a positive and significant effect on audit delay and the simultaneous test shows that the independent commissioner and audit committee have a joint effect on audit delay on the LQ-45 stock index listed on the Indonesia Stock Exchange from 2019 to 2021.

CEO Duality, Audit Committee Independence and Cost of Equity Capital: An Empirical Study from Jordan

CEO Duality, Audit Committee Independence and Cost of Equity Capital: An Empirical Study from Jordan

Dimensions of Audit Committee Quality and CEO Compensation: Examining the Linear Relationship

This study examined the linear relationship between audit committee attributes, proxied with audit committee female diversity, audit committee diligent meeting, audit committee independence and audit committee size and Chief Executive Officer’s compensation, with firm size as a control variable. The study utilised data from 53 non-financial firms between 2013 and 2022 listed in the Nigerian Exchange Group. Using, STAT 14, the study also presented the descriptive statistics information, the correlation matrix and results of Random-effects GLS regression of the study. The results indicate that approximately 6.88% of the variation in Chief Executive Officer’s compensation can be explained by the combined effect of the independent variables, as evidenced by an R-squared value of 0.0688 and an adjusted R-squared of 0.0599. The model’s overall significance is confirmed by an F-statistic of 7.75 and a very low P-value (0.0000), we therefore reject the null hypothesis. The findings reveal that audit committee female diversity, audit committee diligent meeting, and audit committee independence do not have significant linear relationships with CEO compensation, as indicated by their respective P-values (0.542, 0.814, and 0.916). However, audit committee size displays a statistically significant negative linear relationship with CEO compensation (P = 0.000), suggesting that larger audit committees may be associated with lower CEO compensation due to increased oversight or stronger corporate governance structures. Consequently, further investigation with additional variables or alternative modelling approaches is recommended to gain deeper insights into other determinants of CEO compensation.