Role Of Audit Committee Research Articles

Correction to: Whistleblowing regulations and the role of audit committees: insight from interviews

Correction to: Whistleblowing regulations and the role of audit committees: insight from interviews

Board characteristics, audit committee attributes and firm performance: empirical evidence from emerging economy

PurposeThis study is designed and directed to analyze the effect of board characteristics and audit committee attributes on the firm performance of publicly listed commercial banks of Bangladesh.Design/methodology/approachThirty publicly listed commercial banks of Dhaka Stock Exchange (DSE) have been taken as sample for this study. Data have been collected from annual reports between 2011 and 2017 of the assessed banks. Pooled OLS model has been used for running regression model of this study.FindingsBoard independence has a negative and significant relationship with ROA and Tobin's Q. However, Board Independence has a positive and significant relationship with Stock Return. On the other hand, Board Diversity has a negative and significant relationship with ROA and ROE, which implies inefficiency of diversified board members in the context of Bangladesh. Family duality has a positive and significant relationship with ROA and a negative and significant relationship with Stock return. Board Meeting has a positive and significant relationship with ROA. Audit Committee Size has a negative and significant relationship with Tobins' Q. Independence of audit committee chairman has a negative and significant relationship with Tobin's Q and Stock Returns. Presence of non-executive directors and number of audit meetings have no significant relationship with any of the predicted variables.Research limitations/implicationsAmong all variables of the board characteristics, role of independent directors and participation of female directors have conflicting results in this study. This has raised a question about the fair appointment independent directors and their objective view on the board. Female directors' role is not convincing in the context of Bangladesh as most of the commercial banks are family-owned. Policymakers can tighten and supervise the appointment of independent directors to ensure good governance in the banking sector. Moreover, role of audit committee and independence of audit committee chairman have generated conflicting results in terms of market-based performance measure.Originality/valueBanking sector of Bangladesh experiences huge corruption in the form of excessive NPLs and poor management quality which results in low profit for the firm. This study has explored the problems of management quality and flaws of audit committee which is hampering overall growth of banking industry. Improvement of independent directors' appointment and audit committee formation and reporting will certainly help banking industry of Bangladesh to improve overall performance.

The role of audit committees in social responsibility and environmental disclosures: evidence from Chinese energy sector

The role of audit committees in social responsibility and environmental disclosures: evidence from Chinese energy sector

DINAMIKA KARAKTERISTIK KOMITE AUDIT PADA AUDIT REPORT LAG

This study examines the role of the audit committee on audit report lag. The sample in this study was taken from all companies listed on the Indonesia Stock Exchange. The sample selection method using the purposive sampling method. By using multiple regression analysis techniques, it is found that the competence of the audit committee, number of members of the audit committee has a negative effect on the audit report lag. The higher the intensity of the audit committee meeting, the earlier financial reporting supervision occurs. High quality of financial reporting makes the audit period of the financial report audit shorter. The independence of the audit committee does not appear to affects the audit report lag. This is because the object of the examination of the financial statements itself is the annual report. On the other hand, the gender of the female audit committee has a negative effect on the audit report lag. The existence of female gender in the composition of the audit committee plays an important role in shortening the period for completion of audits by independent auditors.Penelitian ini mengkaji tentang peran komite audit terhadap audit report lag. Sampel dalam penelitian ini diambil dari seluruh perusahaan yang terdaftar di Bursa Efek Indonesia. Metode pemilihan sampel menggunakan metode purposive sampling. Dengan menggunakan teknik analisis regresi berganda diketahui bahwa kompetensi komite audit, jumlah anggota komite audit berpengaruh negatif terhadap audit report lag. Semakin tinggi intensitas rapat komite audit, maka semakin dini pengawasan pelaporan keuangan terjadi. Kualitas pelaporan keuangan yang tinggi membuat periode audit laporan keuangan menjadi lebih singkat. Independensi komite audit tampaknya tidak mempengaruhi audit report lag. Hal ini dikarenakan objek pemeriksaan laporan keuangan itu sendiri adalah laporan tahunan. Di sisi lain, jenis kelamin komite audit perempuan memiliki pengaruh negatif terhadap lag laporan audit. Keberadaan gender perempuan dalam komposisi komite audit berperan penting dalam mempersingkat jangka waktu penyelesaian audit oleh auditor independen.

Whistleblowing regulations and the role of audit committees: insight from interviews

Whistleblowing regulations and the role of audit committees: insight from interviews

Corporate Social Responsibility, Audit Committee Expertise, and Financial Reporting: Empirical Evidence from Korea

Corporate social responsibility (CSR) involves multiple activities and is influenced by the cultural and legal environment of the country in which a firm is located. This study examines the role of audit committees’ (AC) financial expertise in the relationship between CSR and the earnings quality of Korean firms with high levels of CSR. Using a multivariate analysis, it investigates whether the ACs that include members with accounting expertise, finance expertise, or supervisory expertise individually affect a firm’s decision making. It also examines how ACs with diverse expertise contribute toward improving the financial reporting quality of firms with high levels of CSR. The results demonstrate that when there is a certified accountant in the AC of a firm that practices CSR based on ethical motivation, the earnings management through discretionary accruals is more strictly controlled. This is more effective when the AC comprises members with accounting and non-accounting expertise. This finding implies that the AC plays a positive role in improving the accounting information quality of firms with CSR excellence. Moreover, while the role of accounting experts in the AC is important for maintaining high earnings quality, combining other types of expertise creates synergy.

How auditor locality affects audit report timeliness

PurposeDespite extensive research on the determinates of audit report timeliness, there is limited empirical evidence on the effect of auditor locality on audit report timeliness. Therefore, this study aims to examine the relationship between auditor locality and audit report timeliness. Furthermore, this study investigates the moderating roles of audit committee, corporate governance and auditor quality in this relationship.Design/methodology/approachIn this study, the information of 157 companies listed on the Tehran Stock Exchange during the period 2013–2019 has been collected. Moreover, multivariate linear regressions were used to test the hypotheses.FindingsFindings show that in general, there is no significant relationship between auditor locality and audit report timeliness. However, empirical evidence suggests that in companies with specialized audit committees, strong corporate governance and high-quality auditors, auditor locality improves audit report timeliness.Originality/valueOverall, the results indicate that there are some circumstances in which auditor locality affects the audit report timeliness. Specifically, the association of auditor locality and audit report timeliness is conditional to audit committee, corporate governance and auditor quality.

The Effect of Audit Committees on the Sustainability of Financial Inclusion Transactions in Saudi Banks in the Light of the Saudi Vision 2030: أثر لجان المراجعة في استدامة الشمول المالي بالمصارف السعودية في إطار رؤية المملكة 2030م

This study aims to examine the relationship between the roles of audit committee and the satiability of financial inclusion in banking sectors in Saudi Arabia. The researcher used the descriptive analytical approach to achieve the aims of the study, and the questionnaire was the tool of the study which applied to (60) of bank employees and managers in Saudi Arabia. The results revealed that there is positive relationship between the role of audit committee in Saudis’ banks and the satiability of financial inclusion with (0.003) less than (0.005) While, there are negative relationship between the satiability of financial inclusion and audit committee meetings, experiences, and the independency of audit committee members (0.400), (0.841) (0.105). Directing the interest of Saudi banks towards designing the objectives of the audit committees in a manner consistent with the requirements of the banking business and in accordance with the goals of Vision 2030.

Audit Committee Accounting Expertise and Audit Quality – the Case of Going-Concern Opinions

This study examines whether audit committee accounting expertise and other audit committee characteristics promote or deter the likelihood of receiving going-concern reports from the auditors and whether such characteristics shield auditors from dismissals after the issuance of a going-concern report. The study finds no significant association between the likelihood of a going-concern report and audit committee accounting expertise or other audit committee characteristics. No significant association is also found for auditor dismissals following going-concern reports and audit committee accounting expertise. These results contrast with prior literature that examined data preceding the passage of the Sarbanes-Oxley Act of 2002 (hereafter SOX) or the period immediately thereafter. Additional analysis shows that audit committee accounting expertise is found to improve the information in going-concern audit opinions by reducing Type I errors, however. Overall, these findings shed light on the evolving role of audit committees in overseeing the auditors and have implications for regulators interested in improving audit quality and investors interested in improving the effectiveness of audit committees.

The Corporate Governance Role of Audit Committees: Through the Lenses of New Zealand Institutional Investors

AbstractThis paper explores how directors of New Zealand institutional investor entities perceive the role of audit committees in their investee firms. We find that perceptions of audit committee mechanisms by directors of New Zealand institutional investor entities are distinct in terms of: (1) the directors’ knowledge of audit committee mechanisms; (2) directors’ evaluation of the governance role of audit committees; and (3) whether and how audit committees in investee firms affect the investment decisions of institutional investors. We argue that the identities of directors and contextualising events may have contributed to the discrete views taken by the directors of New Zealand institutional investor entities. We use institutional theory and discourse analysis to design and analyse the interviews. Our paper presents evidence from New Zealand, where the adoption of audit committees has been largely driven by regulatory changes overseas. Findings from this paper may be of interest to regulators, researchers and practitioners to make informed comparisons with observations from other countries in examining the function of audit committees and in evaluating the implications of corporate governance regulatory changes. Regulators and other corporate governance stakeholders may benefit from this paper by reflecting on the reciprocal influence between an audit committee and the institutionalisation of governance practices.

Internal Audit Effectiveness and Audit Committee Characteristics: Empirical Evidence from Pakistan

Internal audit function (IAF) is a critical component of corporate governance mechanisms, and researchers have argued that internal audit effectiveness (IAE) is of utmost importance to serve the purpose. The study attempts to contribute to a better understanding on the role of audit committee (AC) characteristics (i.e. AC size, AC meeting frequency, AC expertise and AC independence) as a driver of IAE in public limited companies listed in Pakistan stock exchange (PSX). Two sets of questionnaires were distributed in 400 listed companies, whereas 162 completed sets in all respects with a response rate of 41% were received back. The collected data was analyzed using PLS-SEM. The results of the study indicated a positive influence of AC size and AC meeting frequency on the IAE of the listed companies. At the same time, the responses failed to establish any significant relationship between AC independence and AC expertise on the IAE.

Regulatory Changes and Role of Audit Committee : Indian Evidence

Regulatory Changes and Role of Audit Committee : Indian Evidence

Examining the extent of and determinants for sustainability assurance quality: The role of audit committees

AbstractThis study examines the extent of and determinants for sustainability assurance quality. Data comprise sustainability assurance statements published by the top 100 listed companies in Australia and New Zealand from 2017 to 2019. The findings indicate that Australian companies lead their New Zealand counterparts in sustainability assurance. Although sustainability reporting has risen, assurance rates remain significantly low. Accountants dominate the market, and companies prefer to use their own auditors for sustainability assurance work. Sustainability assurance quality is poor and does not vary significantly among Australian and New Zealand companies. Low‐quality sustainability assurance plays a limited role in mitigating potential stakeholder–agency conflicts. The regression analysis indicates that audit committee characteristics such as members' independence, industry/market expertise, and attending meetings enhance sustainability assurance quality, whereas audit committee size has no affect. These findings suggest that audit committee characteristics such as independence, industry expertise, and regular meeting attendance have the potential to reduce stakeholder–agency conflicts by improving the quality of sustainability statement assurance. Our findings build on the sustainability assurance literature by exploring current trends in sustainability assurance practices in Australia and New Zealand where corporate governance codes have been recently revised. Further, these findings are timely given recent changes in standards (International Standard on Assurance Engagements [ISAE] 3000 and Global Reporting Initiative [GRI]). Our study contributes to the audit committee literature and sheds light on the role played by audit committee characteristics on sustainability assurance statement quality. The study findings potentially offer useful insights for practitioners, standard setters, and regulators.

لجان التدقيق من منظورالحوكمة المؤسسية للمصارف وإمكانية تفعيل دورها في التدقيق المشترك (دراسة مقارنة)

يهدف هذا البحث إلى استكشاف مدى التباين أو التقارب بين دليل لجان التدقيق الصادر عن مجلس الإبلاغ المالي (FRC) في المملكة المتحدة، ودليل الحوكمة المؤسسية للمصارف الصادر عن البنك المركزي العراقي، فيما يخص لجان التدقيق وذلك من خلال دراسة مقارنة للدليلين، بغرض الاستفادة من تجربة المملكة المتحدة في مجال لجان التدقيق والأدلة الخاصة بها، مع التركيز على دور هذه اللجان في موضوع التدقيق الخارجي، كما يهدف البحث إلى التعرف على واقع لجان التدقيق في المصارف العراقية الخاصة في إقليم كوردستان/العراق فيما يتعلق بمدى استيفائها للمواصفات، والمهام والصلاحيات لأداء دورها في التدقيق الخارجي، وأخيراً استكشاف المجالات التي يمكن من خلالها تفعيل دور هذه اللجان في التدقيق المشترك الذي يتم تطبيقه في هذه المصارف، ومن خلال الدراسة المقارنة تبين وجود تباين بين دليل (FRC) ودليل البنك المركزي العراقي، كما تبين أن المصارف عينة البحث بحاجة إلى بذل المزيد من الجهود للارتقاء بواقع لجان التدقيق فيها، وأن هناك العديد من المجالات التي يمكن تفعيل دور لجان التدقيق في مجال التدقيق المشترك .

Are narcissistic CEOs more tax aggressive? The moderating role of internal audit committees

This paper examines the effect of chief executive officerś (CEOs) narcissistic tendencies regarding corporate tax avoidance. Moreover, it aims to test the moderating effect of two audit committee characteristics, size and gender, on the relationship between narcissism and tax avoidance. By using a Spanish sample of analysis composed of 1303 firm-year observations from the period 2008–2017, the findings indicate support for our hypotheses. Specifically, CEO narcissism is positively related to tax avoidance. Narcissism is considered a personality trait that causes CEOs to implement tax avoidance strategies. However, this discretional behavior is constrained by some audit committee characteristics. Specifically, firms with larger audit committees help to control the consequences of CEO narcissism on tax avoidance. In addition, gender diverse audit committees are more sensitive to firm tax aggressiveness, and they reduce aggressive tax practices promoted by narcissistic CEOs. Therefore, audit committee effectiveness is critical in monitoring managerial decisions related to tax avoidance.

Gender diversity in audit committees and audit fees: evidence from China

Purpose This study aims to investigate whether the presence of female directors on audit committees affects audit fees in Chinese listed companies. This study also investigates whether the audit committee’s gender diversity moderates the relationship between the firm’s inherent situational factors (e.g. audit complexity and firm risk) and audit fees. Finally, this study investigates whether the effect of the audit committee’s gender diversity on audit fees varies with within-country institutional contingencies (e.g. state-owned enterprises [SOEs] vs non-SOEs and firms that are located in more developed regions vs firms that are located in less developed regions) Design/methodology/approach This study used the data of all A-share listed companies on the Shanghai and Shenzhen stock exchanges for the period from 2009 to 2015. The authors use ordinary least squares regression as a baseline methodology, along with firm fixed effect, Deference in Deference method, two-stage least squares regression, two-stage Heckman model and generalized method of moments models to control for the possible issue of endogeneity. Findings The study’s findings suggest that the presence of female directors on the audit committee improves internal monitoring and communication, which reduce the perceived audit risk and the need for assurances from external auditors. The results also suggest that female directors demand high-quality audits and further assurance from external auditors when the firm is more complex and riskier. In addition, the results suggest that within-country, institutional factors play significant role in shaping the governance role of gender-diverse audit committee. Practical implications The study contributes to the agency theory by providing evidence that the interaction between agency theory and corporate governance “board composition” generates an effective monitoring mechanism and contributing to the institutional theory by finding that role of female directors on audit committee varies from context to another. In addition, this study contributes to literature review of gender diversity in the boardroom by finding the economic benefit of having female directors on audit committee. Finally, this study has implications for policy-makers in promoting regulations to legalize women presence on the board, to external auditors in assessing control risk during planning the audit, to those who responsible for appointing audit committee members. Originality/value The authors extend earlier studies by providing novel evidence on the relationship between gender-diverse audit committees and audit fees in terms of both the supply- and demand-side perspectives; that female directors moderate the relationship between firm inherent situational factors (e.g. audit complexity and firm risk) and audit fees; and that the effect of audit committees’ gender diversity on audit fees varies with sub-national institutional contingencies.

Financial instruments disclosure: Do audit committee and audit quality matter?

This study was motivated by a dearth of empirical literature on the relationship between audit committee characteristics, audit quality and financial instruments disclosure of a developing country. From the Nigerian Stock Exchange, up to date records over the period of three years (that is, from 2016 to 2018) were sourced from the sample size of all the 20 commercial banks and selected 30 insurance companies. After considering the dual role of audit committee as monitors to shareholders wealth and advisors for transparent managerial action based on quality audit information, the empirical analysis which employs a generalised method of moment estimator (GMM) that account for endogeneity concerns (simultaneity, reverse causality and unobserved heterogeneity)indicate that, audit committee meeting frequency (log acm) and audit quality positively and significantly relates to financial instruments disclosure each at 5% level. This result indicates the incentivizing role of audit on the new regulation as it applies to financial institutions in Nigeria. Moreover, firm size (log fsize) is positively related to financial instruments disclosure at 5% level of significance. On the contrary, this study found no significant relationship existing amongst audit committee size and financial instruments disclosure and audit committee meeting frequency and financial instruments disclosure of financial institutions in Nigeria. The study’s implications in the Nigerian context have been discussed.

Risk-based internal audit: factors related to its implementation

PurposeThis study aims to investigate the factors associated with the implementation of risk-based internal audit (RBIA).Design/methodology/approachAs a first step, a literature review of the relevant literature is performed and five potential factors related to the implementation of RBIA are identified. Based on that, this paper constructs a questionnaire survey sent out to 185 internal auditors, executives and accountants in Greece to receive 90 responses during the period of November 2019–January 2020. Multiple regression analysis is conducted to identify the factors related to the implementation of RBIA.FindingsThis paper shows that there is a statistically significant positive relationship between the implementation of RBIA and: the provision of risk management training, an active audit committee role and the establishment of a formalized risk management system.Practical implicationsThe results have important implications for internal auditors, chief executive officers and accountants who wish to enhance internal audit effectiveness and the accuracy and quality of financial information.Originality/valueEmpirical studies on the factors related to the implementation of RBIA are rare. This is the first study to create empirical variables based on a thorough review of the relevant literature to empirically investigate the factors that are related to the implementation of RBIA in an emerging economy. By focusing on the Greek context, this study also sheds light to other countries with similar corporate governance systems, thus providing insights to settings where the Type II agency problem exists (La Porta et al., 1999).

Audit Quality and Tax Avoidance: The Role of Independent Commissioners and Audit Committee's Financial Expertise

Abstract: This study aims to examine the effect of audit quality on tax avoidance. It further examines whether an independent board of commissioners and the audit committee's expertise affect the relationship between audit quality and tax avoidance. The study observed manufacturing companies listed on the Indonesia Stock Exchange (IDX) and the Malaysia Stock Exchange in 2018. Tax avoidance is measured by abnormal book-tax difference, while audit quality is proxied by Big Four-accounting firm and the audit tenure. The test results show that Big Four firms lower the tax avoidance level done by corporations, but not audit tenure. Furthermore, results also show that the audit committee's financial background weakens the relationship between audit quality and tax avoidance, but not an independent board of commissioners. The results are consistently found in both countries examined. The accounting firm that audits the company's financial statements gives an impact on the displayed actual company value, but not with audit committee's expertise which ineffective in carrying out its supervisory function without an understanding of the company's operational and business activities; thus the diversity of audit committee backgrounds is still needed. Furthermore, regulators should consider adopting a policy related to the estimated useful life of assets to minimise the gaps between accounting regulations and tax regulations

The relevance of fair value after the adoption of IFRS 13: fair value measurement and the role of audit committee

This study aims to analyse the relevance of fair value after IFRS 13 adoption, which focuses on the financial assets' fair value for all three (3) levels of the fair value hierarchy. This study als...