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Article
Publication date: 1 January 2013

Venkataraman M. Iyer, E. Michael Bamber and Jeremy Griffin

The purpose of this paper is to examine the characteristics and qualifications of audit committee financial experts. Specifically, the paper examines if the majority of…

3217

Abstract

Purpose

The purpose of this paper is to examine the characteristics and qualifications of audit committee financial experts. Specifically, the paper examines if the majority of the financial experts possess accounting or general management experience.

Design/methodology/approach

The authors collected the data through survey and use cross tabulation (univariate) and logistic regression to analyze the data.

Findings

The results show that accounting certification and audit committee experience are valued positively by the Board of Directors when designating an audit committee member as a financial expert. Prior experience as a CEO results in a lower probability of being designated as a financial expert.

Research limitations/implications

Non‐response bias may be a factor which should be considered. There are other factors such as stock exchange affiliation of the company that have not been included due to the anonymous nature of the survey.

Practical implications

It provides useful information and benchmark to the Board of Directors with respect to the characteristics of designated audit committee financial experts.

Originality/value

This is the first paper to examine the characteristics of audit committee financial experts through survey. The paper presents a richer array of factors compared to what is available in proxy statements. Audit committees, financial statement users, policy makers, and researchers will find the results interesting and useful.

Details

Managerial Auditing Journal, vol. 28 no. 1
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 29 April 2021

Henry Chalu

The purpose of this paper is to examine the determinants of audit report lag in Sub-Saharan African Central Banks. In this case, the determinants were divided into two…

Abstract

Purpose

The purpose of this paper is to examine the determinants of audit report lag in Sub-Saharan African Central Banks. In this case, the determinants were divided into two categories: independent variables and mediating variables. The independent variables, which were generated from board characteristics, included board size, board gender diversity, governor duality, audit committee size and audit committee meetings. The mediating variables were auditing characteristics and they comprised audit mandate, audit approach and audit quality.

Design/methodology/approach

The study used data from 192 observations from African Central Banks' financial reports for the period 2000–2016. The data collected were analyzed using path analysis, whereby four regression models were run and tested simultaneously. From the analysis, the study determined total effects and then decomposed the total effects into direct and indirect effects.

Findings

The study results indicate that in the case of board characteristics, governor duality and audit committee size were found to have a positive influence on audit report lag. In the case of audit quality, only audit mandate was found to have a negative influence on audit quality in the Central Banks. However, the introduction of mediating variables increased the positive effect of governor duality and audit committee size, while also making board size and board gender diversity have a significant negative effect on audit report lag.

Practical implications

The findings of this paper have implications for the practice and policy of the auditing and governance of Central Banks, which includes designing appropriate governance structures as well as proper auditing strategies.

Originality/value

This is the first study which has examined factors influencing audit report lag in Central Banks. Previous studies on Central Banks' governance have examined the independence and autonomy of the Central Banks, as well as their accounting. This paper extends prior studies by examining the effects of those factors. Another contribution is the study's application of auditing characteristics as mediating variables.

Details

Journal of Accounting in Emerging Economies, vol. 11 no. 4
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 14 June 2018

Amina Buallay

In a knowledge economy, it is generally agreed that audit committees play a significant role in supporting the overall firm’s knowledge, particularly enhancing the…

Abstract

Purpose

In a knowledge economy, it is generally agreed that audit committees play a significant role in supporting the overall firm’s knowledge, particularly enhancing the reporting process. In this respect, this paper aims to examine the effect of audit committee characteristics on intellectual capital efficiency.

Design/methodology/approach

This study examined 59 banks for five years (2011-2015), obtaining 295 observations. The study’s independent variable is audit committee characteristics. The dependent variable is intellectual capital components (Human: human capital efficiency [HCE]; Structural: structural capital efficiency [SCE]; Relational: relational capital efficiency [RCE]; and Physical/Financial: capital employed efficiency [CEE]). In addition, the study used four bank-specific control variables.

Findings

The findings deduced from the empirical results demonstrate that there is a significant positive impact of audit committee characteristics on intellectual capital. Moreover, the relationship between audit committee and intellectual capital components (HCE, SCE, RCE and CEE) also has a significant positive relationship if measured individually.

Originality/value

The study provides insights about the relationship between audit committee characteristics and the improvement in intellectual capital efficiency, which might be used by firms to re-arrange the roles within audit committee, to reassign internal priorities and to escalate position in their environment.

Details

Measuring Business Excellence, vol. 22 no. 2
Type: Research Article
ISSN: 1368-3047

Keywords

Article
Publication date: 17 April 2009

Rani Hoitash and Udi Hoitash

Recent US reforms aimed at strengthening audit committees and their structure grant independent audit committees the responsibility to appoint, dismiss, and compensate…

5298

Abstract

Purpose

Recent US reforms aimed at strengthening audit committees and their structure grant independent audit committees the responsibility to appoint, dismiss, and compensate auditors. The purpose of this paper is to examine the association between audit committee characteristics and auditors' compensation and dismissals following the enactment of the Sarbanes Oxley Act (SOX).

Design/methodology/approach

A series of linear and logistic regression models were employed in a unique sample comprising of 2,393 observations.

Findings

It was observed that stronger audit committees demand a higher level of assurance and are less likely to dismiss their auditors. Further, an increase was found in auditor independence as measured by reduced board involvement and less dismissals following an unfavorable audit opinion. Overall results suggest that increased audit committee roles and independence after SOX contribute to auditor independence and audit quality.

Practical implications

This research has implications for regulators, auditors, boards and academics. The paper highlights that although all audit committees had to improve as a result of SOX, the remaining variation in audit committee characteristics continue to be important to the demand for auditor and audit quality.

Originality/value

This study is the first to consider the association between audit committee characteristics and its extended responsibilities after SOX.

Details

Managerial Auditing Journal, vol. 24 no. 4
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 28 December 2021

Amal Mohammed Al-Masawa, Rasidah Mohd-Rashid, Hamdan Amer Al-Jaifi and Shaker Dahan Al-Duais

This study aims to investigate the link between audit committee characteristics and the liquidity of initial public offerings (IPOs) in Malaysia, which is an emerging…

Abstract

Purpose

This study aims to investigate the link between audit committee characteristics and the liquidity of initial public offerings (IPOs) in Malaysia, which is an emerging economy in Southeast Asia. Another purpose of this study is to examine the moderating effect of the revised Malaysian code of corporate governance (MCCG) on the link between audit committee characteristics and IPO liquidity.

Design/methodology/approach

The final sample consists of 304 Malaysian IPOs listed in 2002–2017. This study uses ordinary least squares regression method to analyse the data. To confirm this study’s findings, a hierarchical or four-stage regression analysis is used to compare the t-values of the main and moderate regression models.

Findings

The findings show that audit committee characteristics (size and director independence) have a positive and significant relationship with IPO liquidity. Also, the revised MCCG positively moderates the relationship between audit committee characteristics and IPO liquidity.

Research limitations/implications

This study’s findings indicate that companies with higher audit committee independence have a more effective monitoring mechanism that mitigates information asymmetry, thus reducing adverse selection issues during share trading.

Practical implications

Policymakers could use the results of this study in developing policies for IPO liquidity improvements. Additionally, the findings are useful for traders and investors in their investment decision-making. For companies, the findings highlight the crucial role of the audit committee as part of the control system that monitors corporate governance.

Originality/value

To the authors’ knowledge, this work is a pioneering study in the context of a developing country, specifically Malaysia that investigates the impact of audit committee characteristics on IPO liquidity. Previously, the link between corporate governance and IPO liquidity had not been investigated in Malaysia. This study also contributes to the IPO literature by providing empirical evidence regarding the moderating effect of the revised MCCG on the relationship between audit committee characteristics and IPO liquidity.

Details

Management Research Review, vol. 45 no. 11
Type: Research Article
ISSN: 2040-8269

Keywords

Article
Publication date: 14 January 2022

Adel Almasarwah, Wasfi Alrawabdeh, Walid Masadeh and Munther Al-Nimer

The purpose of this paper is to explore the link between earnings quality, Audit Committees and the Board of companies located in Jordan through the lens of enhancing…

Abstract

Purpose

The purpose of this paper is to explore the link between earnings quality, Audit Committees and the Board of companies located in Jordan through the lens of enhancing corporate governance.

Design/methodology/approach

The real earnings management (REM) and accruals earnings management models were notably used within the panel data robust regression analysis approach; these were used against certain Audit Committee characteristics (i.e. meeting frequency, amount of Board and Committee participants [both internal and external], size) and Board of Directors.

Findings

The former characteristics were found to have a positive relationship with REM, while the latter yielded mixed results: while there was no significant identifiable relationship between Board outsiders and REM, there was a positive relationship identified between Board meetings, Board insiders and Board size and REM. In regard to this study’s limitations, the qualitative data gathered for the Board of Directors through the lens of corporate governance enhancement should have been documented with more detail; furthermore, the study was limited to the study of just one nation.

Research limitations/implications

The data is limited to only a single country. More explanation for Board of Directors need qualitative understandings into corporate governance improvement. The control variables are essentially partial in a developing market context.

Practical implications

The different corporate governance code and guidelines improvements have varied influence on earnings quality. As predictable, boards of directors most effect on earnings quality. Improvements have included most modification to audit committees but through them slight measured effect on earnings quality.

Social implications

Jordan’s corporate governance improvements expected organised corporate governance practices generally in place amongst its boards, and though invoking considerable modification to audit committees, eventually included slight modification to earnings quality. However, both improved earnings quality.

Originality/value

This particular research appears to be the first to consider both Audit Committee and Board of Directors characteristics in one model; indeed, in this vein, this research is also the first to explore the corporate governance enhancements that initially stemmed from there being zero code or guideline regarding its use, despite it becoming required recently. Hence, the authors can say this study has high originality.

Details

Journal of Financial Regulation and Compliance, vol. 30 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 5 October 2015

Nonna Martinov-Bennie, Dominic S.B. Soh and Dale Tweedie

This paper aims to investigate how the roles, characteristics, expectations and evaluation practices of audit committees have adapted to regulatory change and what…

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Abstract

Purpose

This paper aims to investigate how the roles, characteristics, expectations and evaluation practices of audit committees have adapted to regulatory change and what practices are most conducive to effective audit committees.

Design/methodology/approach

This paper uses semi-structured interviews with audit committee chairs and chief audit executives.

Findings

While new regulation is a primary driver of changes in the roles of audit committees, the audit committee’s role has evolved beyond regulatory requirements. Audit committees are taking a more active role in organisational governance and performance in key areas such as risk management. However, while audit committees have a clear concept of what characteristics committee members require, conceptual frameworks and mechanisms for evaluating the performance of committees and their members remain underdeveloped.

Research limitations/implications

The responses of audit committees in Australia to broader regulatory trends suggest that more research is required into how audit committees function in practice, and into developing new frameworks for evaluating the committees’ performance. This paper provides an in-depth exploration of key areas of audit committee performance, and identifies aspects that might be further investigated.

Practical implications

The paper identifies key attributes of effective audit committees and especially the characteristics of audit committee members. The paper also identifies a need to improve – and in many cases create – performance evaluation frameworks and mechanisms. Given the international regulatory trend towards greater reliance on audit committees to improve governance, more policy attention is required on developing guidelines and assessment processes that evaluate whether audit committees are fulfilling their legislative mandate in practice.

Originality/value

The paper contributes to the relatively new and more specific discussion on reviewing and evaluating the performance of the board and its subcommittees.

Details

Managerial Auditing Journal, vol. 30 no. 8/9
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 9 October 2017

Maryam Safari

The purpose of this paper is to contribute to the corporate governance literature by examining the aggregate effect of board and audit committee characteristics on…

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Abstract

Purpose

The purpose of this paper is to contribute to the corporate governance literature by examining the aggregate effect of board and audit committee characteristics on earnings management practices, particularly in the period following the introduction of the second edition of the Australian Securities Exchange (ASX) Corporate Governance Principles and Recommendations.

Design/methodology/approach

This paper begins by embarking on an extensive review of extant empirical research on boards of directors and audit committees. Then, the paper reports on the use of a quantitative analysis approach to specify the relationship between board and audit committee characteristics (introduced by the ASX Corporate Governance Council) and the level of absolute discretionary accruals as a proxy for earnings management.

Findings

The findings suggest that greater compliance with board and audit committee principles is linked to lower earnings management, indicating that deliberate structuring of boards and audit committees is an effective approach for enhancing a firm’s financial reporting quality and providing support for the efficacy of the second edition of principles and recommendations related to boards and audit committees suggested by the ASX Corporate Governance Council.

Practical implications

This study significantly extends the literature and has notable implications for financial reporting regulators, as the findings regarding the monitoring role of boards and audit committees should be beneficial for future revisions of corporate governance principles and recommendations.

Originality/value

This study focuses on the aggregate effect of board characteristics recommended by the Australian Corporate Governance Council on earnings management practices, and the results support the effectiveness of the board and audit committee characteristics recommended by the ASX Corporate Governance Council. New directions for future improvements to the principles and recommendations are identified.

Details

Managerial Finance, vol. 43 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 25 May 2022

Egor D. Nikulin, Marat V. Smirnov, Andrei A. Sviridov and Olesya V. Bandalyuk

The purpose of this paper is to investigate the specifics of the relationship between audit committee characteristics and earnings management in Russian listed companies…

Abstract

Purpose

The purpose of this paper is to investigate the specifics of the relationship between audit committee characteristics and earnings management in Russian listed companies. This research is driven by the possibility of placing this relationship within the context of a specific institutional environment for company performance.

Design/methodology/approach

The authors apply a panel study of 184 Russian listed companies for the period 2014–2018. In addition to the standard fixed effects model, the authors test the results for potential endogeneity with two-stage least squares (2SLS) analysis.

Findings

The results show that audit committee representation on the board of directors results in some mitigation of earnings management. Results reveal that a higher level of audit committee independence and the presence of financial expertise on the committee are associated with lower earnings management. However, companies with relatively busy directors on audit committees are more inclined to practice earnings management. The study’s findings hold after testing for endogeneity of audit committee independence. The authors also reveal that some audit committee characteristics (for example, audit committee independence; its level of expertise) alleviate earnings management in listed state-owned companies (SOEs) more strongly than in listed non-SOEs.

Originality/value

The results add to the ongoing debate on the role of corporate governance mechanisms in mitigating earnings management in emerging markets by taking into account the type of ownership (state-owned vs private) as a moderating variable. This study reveals, in particular, that the effect of certain audit committee characteristics on earnings management is more prominent in listed SOEs than in listed non-SOEs.

Details

Corporate Governance: The International Journal of Business in Society, vol. 22 no. 7
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 4 October 2021

Mohamad Rifai and Sylvia Veronica Siregar

This study aims to examine the effect of the audit committee characteristics on forward-looking disclosure.

Abstract

Purpose

This study aims to examine the effect of the audit committee characteristics on forward-looking disclosure.

Design/methodology/approach

The characteristics of audit committee that examined are audit committee expertise, audit committee meeting frequency and audit committee size. To measure the extent of forward-looking disclosure, this study did content analysis using a checklist of 22 forward-looking items. The samples of this research are 285 non-financial firms listed on the Indonesia Stock Exchange in the year 2015. Ordinary least square regression is used for hypotheses testing.

Findings

The results of this study show that the audit committee accounting expertise, audit committee financial expertise, the frequency of audit committee meetings and the size of the audit committee have a significant positive effect on the forward-looking disclosure.

Originality/value

To the best of the authors’ knowledge, this is the first study examining the audit committee characteristics on forward-looking disclosure in the context of Indonesia, one of the emerging markets.

Details

Journal of Financial Reporting and Accounting, vol. 19 no. 5
Type: Research Article
ISSN: 1985-2517

Keywords

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