Editorial

Citation

Cooper, B.J., Leung, P. and Martinov-Bennie, N. (2013), "Editorial", Managerial Auditing Journal, Vol. 28 No. 1. https://doi.org/10.1108/maj.2013.05128aaa.001

Editorial

Article Type: Editorial From: Managerial Auditing Journal, Volume 28, Issue 1

Managerial Auditing Journal (MAJ) has been published for 27 years and during that time has witnessed the shifting paradigm of auditing. The new focus of MAJ continues to highlight the important role of auditing and assurance but also explicitly recognises its significance within the broader perspective of management performance, risk and governance.

The approach adopted by MAJ takes our readers beyond the traditional conventions of auditing. For example, we examine issues of financial report integrity from all perspectives and offer opportunities for intellectual discourse globally. Different cultures, different regulatory regimes and different complexities within organisations, where management performance influences not only governance policies but also the broader risk perspectives and approaches undertaken by external stakeholders, are examined. We publish articles based on positive, critical and other alternative theories that may explain and discover new phenomena in the challenging arena of assurance, risk and global convergence. This relaunched broader scope brings under the MAJ umbrella assurance, management performance and governance in an integrated and dynamic approach, enabling exploration of contemporary issues in the global business environment.

We publish four papers in this first issue of Vol. 28 (2013). Each paper covers a distinct and divergent perspective of the new scope, whilst also simultaneously linking with one another on specific aspects of assurance, management performance and governance.

While good governance is essential in the global environment, literature has generally focussed on the “best practice approach” of developed countries. As indicated in Baydoun et al. (pp. 7-22), there has been very little empirical work undertaken to examine the performance of corporate governance in developing countries, such as in the Arabian Gulf region. Baydoun et al. look at a range of factors that are directly related to corporate governance in the Gulf region, acknowledging the cultural orientation of Islamic beliefs and practices. Though there are differences between the five Gulf countries examined, Baydoun et al. suggest that applying the OECD standards of corporate governance has shown that these countries support an approach to corporate governance similar to more developed countries. However, the extent of shareholder rights and obligations are primarily biased towards heavily concentrated share ownership structures. The lack of procedures for addressing internal issues such as reward systems and special committees are the key factors that result in poor corporate governance processes. As is evidenced in this paper, governance in this region consists more of rhetoric than sound practices, where controls are concentrated amongst a few board members and boardroom passivity is widespread. One of the key issues leading to such a phenomenon is the lack of qualified personnel in large corporations, especially with respect to non-executive directors. On the other hand, as there is no national accounting standards body, the extent of the lack of transparency in financial reporting and efficient internal control systems has provided opportunities for abuse and corruption. As the authors indicate, the Gulf countries are rich with capital, such as oil and gas reserves, enjoying a relatively high GDP per capita. These snapshots of corporate governance provide a clear opportunity for further research and reporting in this area.

Moving from the Gulf countries to Asia, Rusmin et al. (pp. 23-44) turn our attention to the relatively more developed governance structures of Asian firms. Transportation services are a highly capital intensive industry linked to the world economy, oil and technological development. The choice of examining the impact of the global financial crisis (GFC) and financial governance issues in seven key Asian countries (China, Hong Kong, India, Japan, Korea, Malaysia and Singapore), demonstrates another dimension of governance. The paper considers the relationship between the management performance of income smoothing behaviour and the impact of political costs during the GFC period.

Both of the above studies employ survey data and provide a macro view of governance issues that are non-Anglo based. While these papers offer a capital intensive perspective (country and industry), the next paper in this issue delves further into industry specialisation and governance.

Sun and Liu (pp. 45-64) draw our attention to the influence of industry specialisation in assurance of governance and earnings management within the more mature US market. The key issue examined by Sun and Liu is to develop a further understanding of the relationship between the board (and in particular its outside directors) and the auditor, identifying any complementary contribution to corporate governance. It further addresses the arguments of Tsui et al. (2001) and Kwon et al. (2007), who suggest that audit industry specialisation may substitute for corporate governance, by providing more explicit evidence that high quality boards can benefit from industry specialist auditors.

The final paper in this issue moves from the global trend and the capital intensive industry perspective of corporate governance and audit specialisation to a further analysis of board quality. This paper continues the theme of corporate governance by examining the impact of the Sarbanes-Oxley Act to offer some further evidence in terms of board quality. Through a survey of audit committee members, Iyer et al. (pp. 65-78) look at the characteristics of the financial expertise of audit committee members in 167 companies in the USA. Further evidence is provided with respect to whether the designated financial experts were former CEOs, or had some prior professional relationship with members of the board.

The four papers published in this first Issue of Vol. 28 provide a broad spectrum approach to assurance, management performance and governance. Baydoun et al.’s paper demonstrates the ways in which the corporate governance regimes in the Gulf countries are developing. They acknowledge the influence of a number of factors including a wide range of stakeholders, the political landscape and the specific cultural practices of these countries. Political costs are highlighted in the second paper by Rusmin et al., in the Asian transport industry, which in turn, have influenced management performance. Board performance and competence can also influence the relationship between assurance and governance, as evidenced by Sun and Liu’s paper, where they examine how the selection of specialist auditors impacts on governance. Finally, board quality, financial expertise and audit committee characteristics provide an overall integrated view of audit and assurance within the broader context of management performance and governance in this Issue of MAJ.

Barry J. Cooper, Philomena Leung, Nonna Martinov-BennieJoint Editors