Audit Committee Independence Research Articles

The effect of corporate governance on earnings management moderated by political connection

Research aims: This research aims to prove the effect of independent commissioner performance and audit committee expertise on earnings management to avoid earnings decreases and political connections to strengthen independent commissioner performance and audit committee expertise to limit earnings management.Design/Methodology/Approach: The population was manufacturing firms listed on Indonesian Stock Exchange during 2017-2020. The sampling technique used purposive sampling with a sample of 102 firms for four years or 408 observations. Then, hypothesis testing employed multiple regression analysis and hierarchical regression analysis.Research findings: The results showcased that accrual earnings management and abnormal discretionary expenses were used by managers to avoid decreases in earnings. On the other hand, corporate governance, like audit committee expertise, could be used to limit earnings management. While the political connection could strengthen and weaken the effect of independent commissioner performances in limiting earning management, political connections could not strengthen audit committee expertise in limiting real and accrual earnings management.Theoretical contribution/Originality: This research contributes to the political connection and earning management literature and provides empirical evidence of agency theory, positive accounting theory, prospect theory, and resource dependence theory.Practitioner/Policy implication: This research contributes to investors in determining investment decisions.Research limitation/Implication: The limitation of this research is that independent variables only used two components of corporate governance, i.e., the independent commissioner performances and audit committee expertise, so the level of influence of the independent variables on the dependent was small.

The Impact of Good Corporate Governance (GCG) on Manufacturing Financial Performance: Evidence of Listed Companies on the Stock Exchange (IDX)

The purpose: This research is to scrutinize the impact of the board of directors (BoD), the board of commissioners (BoC), the proportion of independent commissioners (PoIC), managerial ownership (MO), and the audit committee (AC) on the company's financial performance manufacturing financial performance from 2015 to 2019. The theoretical framework: Composition from several variables which are Board of Directors (BoD), Board of Commissioners(BoC), Proportion of Independent Commissioner(PoIC), Managerial Ownership (MO), and Audit Committee (AC). Design/Methodology/Approach: In this research, secondary data was used with a purposive sampling method to determine the number of samples. The number of samples obtained was 98 company data. Then, this study employed the multiple linear techniques. The tool utilized in this research were the Microsoft excel program and SPSS version 21. The Findings: research revealed that BoD, BoC, and MO variables significantly influenced the company's financial performance, whereas PoIC and AC did not significantly impact financial performance. Research, practical and social implications: This study attempted to highlight the impact of excellent corporate governance on company financial performance at (Indonesia stock exchange manufacturing listed companies) in latest years as well as to show things that can be done in improving the quality of the company by improving the financial performance of the company. Therefore, Originality/value: The value of the study every company is competing to improve the quality of the company to achieve its goals and be able to compete with other companies through the GCG is a rule of good governance for a firm between various participants by managing resources economically, productively, effectively, and efficiently to achieve the organization's goals.

Independent Audit Committee, Risk Management and Wealth Management in Banks

The different facets of risk management, personal finance, wealth management products, supervisory standards for bank governance, and risk governance are covered in this abstract. It emphasises the importance of these subjects in relation to the banking sector and the larger financial landscape. A key task performed by banks is risk management, which identifies, evaluates, and mitigates risks that could jeopardise the performance and stability of their finances. It requires the implementation of robust structures and procedures in order to preventively manage credit risk, market risk, operational risk, and liquidity risk. By successfully managing these risks, banks can increase their resiliency and ensure the preservation of stakeholders' interests. Budgeting, saving, investing, and retirement planning are all included in the management of a person's financial resources, which is referred to as personal finance. It places emphasis on the value of financial literacy and the necessity of making knowledgeable choices regarding one's own finances. The goal of personal finance is to give people the tools they need to fulfil their financial objectives, amass money, and safeguard their financial future. Specialised financial tools and services known as "wealth management products" are offered to institutional and high-net-worth clients. To maximise wealth creation and preservation, these solutions provide individualised investing methods, portfolio diversification, and risk management measures. To satisfy the specific needs and goals of their customers, wealth managers use a variety of investment vehicles, including stocks, bonds, alternative investments, and estate planning tools. In terms of bank governance, supervisory requirements relate to the rules and directives that are enforced by regulatory bodies to guarantee effective governance practises within banks. By strengthening banks' transparency, accountability, and risk management skills, these measures work to strengthen the financial system's stability and soundness. They cover topics like board makeup, risk management plans, internal checks, and compliance protocols. Establishing a solid framework and procedures for managing risks inside an organisation is what risk governance implies. It entails identifying one's risk tolerance, establishing risk management goals, and putting good risk management procedures into practise. Risk management makes sure that risks are properly recognised, evaluated, and tracked, and that the right mitigation techniques are in place. Additionally, it encourages accountability across the board and builds a culture that is risk-aware. whole, these sectors are crucial to the banking sector and have a significant impact on people, financial institutions, and the whole economy. Banks can successfully navigate the complexities of the financial landscape, mitigate risks, and generate long-term value for all stakeholders by implementing strong risk management practises, providing comprehensive personal finance solutions, creating tailored wealth management products, adhering to supervisory requirements, and establishing effective risk governance frameworks

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.

Board Committees’ Independence and Financial Performance of Listed Non-Finance Firms in Nigeria

This study examined the relationship between board committees’ independence and financial performance of listed non-finance firms in Nigeria. The specific objectives were to determine the relationship between audit committee’s independence and financial performance of listed non-finance firms in Nigeria; evaluate the relationship between risk management committee’s independence and financial performance of listed non-finance firms in Nigeria; ascertain the relationship between remuneration committee’s independence and financial performance of listed non-finance firms in Nigeria. Ex-post facto research design was adopted and the population of the study consists of all the listed non-finance firms. As of December, 2021, we had 108 non-finance firms listed on the floor of the Nigerian Exchange Group. The final sample size consists of 10 non-finance firms that were arrived at based on the availability of data for ten years for all the research variables. Findings revealed that audit committee independence significantly influence the performance of non-finance companies in Nigeria; Risk committee independence significantly influence the performance of non-finance companies in Nigeria and remuneration committee independence negatively influence the performance of non-finance companies in Nigeria. Specifically, the study concluded that only the variable of remuneration committee independence has negative but insignificant effect on firm financial performance. Furthermore, the study concluded that and increase in audit committee independence and risk management committee independence significantly increase the financial performance of listed non-finance firms in Nigeria. Based on the findings of this study, the researcher recommended that corporate boards of non-finance firms should maintain a sizeable audit committee that are dominated by non-executive directors and shareholders so as to maintain their independence as this significantly influence the firm financial performance.

Audit Committee Characteristics and Quality of Financial Reporting In State Corporations in Kenya

The study sought to assess the influence of audit committee characteristics on the quality of financial reporting in state corporations in Kenya. Audit committees are created with a sole purpose of affirming the trust towards the company’ integrity in the hearts of the stakeholders in regard to the internal procedures; the exercise by the committee gives the stakeholders’ confidence in matters oversight assigned to the committee. Specifically, the study sought to examine the effect of audit committee expertise and audit committee independence on quality of financial reporting among state corporations in Kenya. An explanatory research design was employed to attain the study's purpose. The study's target population was the 187 government-owned enterprises in Kenya. A sample of 127 firms was selected using a stratified random sampling. A structured questionnaire was utilized to collect data. The data was analysed through descriptive and inferential statistics using the SPSS software. The findings from the study revealed that audit committee expertise has a significant influence on the quality of financial reporting in state corporations. The findings further revealed that the independence of the audit committee had a significant and positive influence on the quality of financial reporting in state corporations in Kenya. The study concluded that through the independence, and expertise of the audit committees, state corporations in Kenya had better quality of the financial reporting. It is therefore recommended that the government through the respective agencies upholds the independence and expertise of the audit committees in order to enhance their ability to deliver appropriate quality of the financial reporting in the corporations.

The Impact of Corporate Governance Mechanism on Fair Value Measurement in the Indonesian Banking and Financial Industries

Fair value is one of an important measurement since the diffusion of International Financial Reporting Standards around the world. Studies of manager opportunistic behaviors through fair value numbers in developing countries have been overlooked. This study aims to investigate the influence of corporate governance mechanism towards an opportunistic behavior through fair value measurement i.e. fair value inputs level 3. This study applied multiple regression and used samples of banking and financial companies listed in Indonesia Stock Exchange between 2015 and 2019. The corporate governance is proxied by three measurements i.e. managerial ownership, institutional ownership and audit committee educational background. This study finds that managerial ownership and institutional ownership have positive influences on fair value inputs level 3. Meanwhile, the independent commissioners and audit committee educational background have negative influences on fair value inputs level 3. Therefore, this study provides evidence that independent commissioners and audit committee educational background can reduce management opportunistic behaviors which is conducted through fair value measurement.

Impact of corporate governance on firm performance: a case of Pakistan stock exchange

This study investigates the impact of Corporate Governance on Firm Performance. The corporate governance has been operationalized through eight indicators including the Board Size, Ownership Structure, CEO Duality, Independence of Audit Committee, Firm Size, Firm Age, Firm Leverage, and Firm Growth, while the Firm performance has been factored into Return on Assets, and Return on Equity. Pakistan stock exchange has been used as the unit of analysis, taking 100 public listed firms from the non-financial sector, as the sample. Data around the study variables have been collected and analyzed for a period of 10 years, i.e., 2013-2022, using suitable statistical tools. The findings reveal that lean board size, moderate leverage, CEOs serving on various boards, high independence on audit committees, large firm size, young firms, and sustainable growth positively impact the firm performance. High leverage has been found to have an adverse impact on firms’ profitability, especially in the wake of high interbank offered rates. These findings are important the practitioners, corporate regulators, and researchers. Future studies are recommended to take more indicators from the corporate governance index into account for understanding their impact on firm performance.

Implementasi Perubahan Peraturan mengenai Pembebasan Bea Masuk dan Pajak Impor pada Usaha Mikro Kecil dan Menengah

This study aims to examine the effect of the characteristics of the board of directors and audit committee on real earnings management. Three measurements are used to measure real earnings management, namely abnormal cash flow from operations, abnormal discretionary expenses, and abnormal production costs. Company management can manipulate operational activities such as sales, reduce discretionary costs, and manipulate production levels excessively. Using purposive sampling method, this study uses a total of 98 observation of manufacturing companies that are listed on the Indonesia Stock Exchange during 2017 to 2021. The data collected will be tested with the help of Eviews software. The data analysis methods used in this study include descriptive statistical analysis, panel data regression test, and hypothesis testing. The results of this study reveals that audit committee size variable hasa significant positive effect on real earnings management, while the board of directors size variable, board of directors independence, board of directors meetings, audit committee independence, audit committee meetings, and audit committee expertise do not affect real earnings management.

Independent Audit Committee, Risk Management and Wealth Management in Banks

Independent Audit Committee, Risk Management and Wealth Management in Banks

Effects of Corporate Governance on Creative Accounting Practices: Evidence from NSE-listed Companies in India

This paper investigates the effects of corporate governance on creative accounting practice in Indian NSE-listed public companies. To get insights and analysis of how mitigating effects of governance issues can impact creative accounting practices, a specific set of factors is identified and the multistage technique design is employed to collect samples of 51 companies with 255 firm-year observations for the years 2017–2021. The value of discretionary accrual as estimated using the modified Jones model. The panel data are used for analysis and testing the hypothesis with the help of Stata 15 version statistical software. The results of this study demonstrated that only audit independence has a considerable negative influence on creative accounting practice, indicating that increasing the number of audit independence could reduce unethical accounting manipulation in financial reporting practice. The paper digs further and provides additional details that the board size, return on asset and firm growth significantly appears under a flag of positive creative accounting practices. In contrast, the board’s independence, audit committee, firm size and leverage have no such influence on creative accounting practice. The study also recommends that companies should have an independent audit committee, so as to minimise the accounting irregularities in financial reports.

Board reforms and innovation

We study the effect of board reforms on firms' research and development (R&D) investments utilizing a sample of 41 countries. Using a difference-in-differences analysis, we find that firms invest more in R&D following corporate governance reforms. Of these, two legal reforms — having an independent audit committee and board independence — have a greater impact on R&D investment. Additionally, we show that board reforms have a more pronounced effect on R&D investment in hi-tech industries and the health sector.

The Impact of Audit Committee Independence and Size on the Audit Report Delay: An Applied Study

The Impact of Audit Committee Independence and Size on the Audit Report Delay: An Applied Study

The Effects of Corporate Governance, Managerial Ownership and Bonus Plan on Earnings Management: A Case of ASEAN-3 Companies

This study is to examine and analyze the effects of corporate governance, managerial ownership, and bonus plan on earnings management of manufacturing and financial companies, which are listed on the Indonesia Stock Exchange, Malaysia Stock Exchange, and the Philippines Stock Exchange. It analyzed the balance sheet data, income, and capital statements presented in the 2008-2012 periods and applied the multiple linear regression analysis and one-way ANOVA to test the proposed hypotheses. The findings showed that corporate governance, managerial ownership, and bonus plan simultaneously did not affect earnings management. There was no significant difference in the proportion of independent board of commissioners, the size of the board of directors, proportion of independent audit committee, managerial ownership, bonus plan, and earnings management between Indonesia, Malaysia, and the Philippines stock exchanges. It implies that the ASEAN-3 companies consider corporate governance unimportant in managing their earnings. It also gives new insights into a rare phenomenon of agency theory findings in semi-strong market efficiency post-global financial crisis 2008.

Anti-corruption disclosure quality and earnings management in the United Kingdom: the role of audit quality

PurposeBuilding upon institutional pressures on firms to deal with corruption, this study aims to investigate the association between a firm's engagement with anti-corruption disclosure quality (ACD_Q) and earnings management (EM). Also, this study examines the moderating role of audit quality in the association between ACD_Q and EM.Design/methodology/approachThe authors constructed an ACD_Q index based on the 2010 UK Bribery Act and taking into account a wide range of rules on corruption and bribery, including those of the OECD, World Bank, UNCTAD, UNGC, UNCAC and GRI. Generalized method of moments and panel regression were used to examine the association between ACD_Q and EM.FindingsUsing a sample of 2,695 firm‐year observations of the UK’s FTSE-350 from 2008 to 2018, this study finds ACD_Q is negatively associated with EM. In addition, this negative relationship is contingent on audit committee independence and audit committee expertise. This finding is supported by additional robustness and sensitivity analysis.Practical implicationsThe empirical evidence reiterates the crucial need for more concerted efforts to ensure corporate engagement in anti-corruption practices with a view to reducing earnings manipulations.Originality/valueThis study contributes to the limited evidence that investigates how ACD Q influences EM in the UK after the introduction of the UK Bribery Act in 2010. Furthermore, by considering the period from 2008 to 2019, this study investigates the potential moderating role of UK corporate governance reforms in EM reduction. In particular, to the best of the authors’ knowledge, this study assesses for the first time the moderating effect of audit committee mechanisms on the ACD Q and EM nexus.

Audit committee effectiveness and audit quality: the moderating effect of joint audit

PurposeThe main aim of the present study is to assess the moderating effect of joint audit (JA) on the relationship between audit committee effectiveness (ACEFF) and audit quality (AQ) in Egypt.Design/methodology/approachThe sample included 61 non-financial corporations listed on the Egyptian Exchange from 2016 through 2020. The results are estimated using panel data analysis with fixed-effect models.FindingsThe findings exhibit that audit committee (AC) independence, ACEFF; and audit firm size negatively affect AQ. Conversely, the influence of AC meetings on AQ is positive and significant. The findings also reveal that JA moderates the relation between the ACEFF and AQ.Research limitations/implicationsThe study offers theoretical contributions to corporate governance mechanisms, JA; and AQ by using data from listed firms in Egypt. The study is the first one that examines the moderating role of JA on ACEFF and AQ.Practical implicationsThe study has practical implications for investors, board members, practitioners, academicians; and policymakers. Moreover, the study contributes using a composite measure for the ACEFF score.Originality/valueThe findings, supported by agency, resource dependence; and signaling theories, contribute to a better understanding of the relationship between ACEFF, AQ; and JA. The evidence about JA is still unknown in developing countries. Further, revisiting AQ with different measures, particularly accounting conservatism, has not been a subject of prior studies.

Audit committee diligence: do independent directors matter?

PurposeThis paper aims to examine the relationship between audit committee (AC) independence and AC meeting frequency in an emerging country where the presence of majority independent directors (IDs) on AC is a voluntary requirement.Design/methodology/approachThis study uses the agency theory framework to examine the relationship between AC independence and AC meeting frequency. The empirical evidence is provided by a unique hand-collected sample of Bangladeshi listed companies. Multivariate regression analysis is used to test the relationship. Robustness checks provide further empirical support.FindingsThis paper finds a positive and significant relationship between AC independence and AC meeting frequency. This is consistent with the notion that IDs are better monitors and demand more frequent AC meetings to protect their reputations. However, having at least two IDs does not significantly affect the number of AC meetings in family firms. This evidence questions director independence in family firms.Research limitations/implicationsThis is a single-country study. Therefore, the findings may not apply to other countries with different institutional settings.Originality/valueUnlike most prior studies, this study is based on a voluntary institutional setting where the companies are not required to have ACs comprising the majority of IDs. In such a setting, the authors find a significantly positive association between AC independence and meeting frequency compared to either a negative or insignificant relationship in the prior literature.

Audit fees and financial reporting quality of listed non-financial services firms in Nigeria: Moderating role of audit committee independence

Audit fees and financial reporting quality of listed non-financial services firms in Nigeria: Moderating role of audit committee independence

Corporate Governance, Leverage, dan Integritas Laporan Keuangan pada Perusahaan Badan Usaha Milik Negara

This study aims to determine the effect of Corporate Governance which is proxied by independent commissioners and audit committees, leverage on the integrity of financial statements. The population of this study is state-owned companies listed on the Indonesia Stock Exchange for the 2017-2021 period. The sample selection method used was purposive sampling and 12 companies were selected with a total sample of 60 research data. The analysis technique used is multiple linear regression with SPSS version 25 software. The results show that independent commissioners and audit committees have no effect on the integrity of financial statements, while leverage has a negative effect on the integrity of financial statements.Keywords: Independent Commissioners, Audit Committees, Leverage, Integrity of Financial Statements

KOMITE AUDIT DAN KREDIBILITAS PENGUNGKAPAN CSR: BUKTI DARI PERUSAHAAN PERTANIAN DI BURSA EFEK INDONESIA

This study aims to examine and analyze the influence of independent audit committees, audit committee financial expertise, frequency of audit committee meetings and audit committee gender in increasing the credibility of CSR disclosure: in agricultural companies on the Indonesia Stock Exchange. While the sample in this study used purposive sampling with a total sample of 41. The type of data used in this research is quantitative data in the form of secondary data with collection techniques using documentation. The data analysis technique uses multiple regression and is tested using the t test. The results of this study indicate that independent audit committees, audit committee financial expertise, frequency of audit committee meetings and audit committee gender in increasing the credibility of CSR disclosure: in agricultural companies on the Indonesia Stock Exchange.