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Article
Publication date: 1 January 2006

Patricia M. Myers and Douglas E. Ziegenfuss

This study of audit committee effectiveness, performed in the period immediately preceding the Enron collapse, seeks to determine whether audit committees were beginning

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4268

Abstract

Purpose

This study of audit committee effectiveness, performed in the period immediately preceding the Enron collapse, seeks to determine whether audit committees were beginning to accept more responsibility for corporate governance before such behavior became mandatory.

Design/methodology/approach

The period studied was approximately two years prior to the Sarbanes‐Oxley Act of 2002 and roughly one year after the Blue Ribbon Committee published its recommendations on audit committee effectiveness. The efforts of 296 audit committees to improve their effectiveness as reported by Chief Audit Executives (CAEs) to the Global Audit Information Network (GAIN) database maintained by the Institute of Internal Auditors (IIA) were investigated.

Findings

It was found that audit committees' responsiveness to each of eight effectiveness steps was surprisingly high. For instance, almost all (w99.6 percent) audit committees meet with CAEs. It is recommended that audit committees focus more on big picture/strategic concerns in their discussions with CAEs.

Research limitations/implications

The study's chief limitation is that only companies with internal audit functions were studied and thus the results cannot be generalized to companies without internal audit functions.

Originality/value

This study was the first to utilize the GAIN database and provides specifics about 15 different topics that CAEs might bring to audit committees for discussion. Topics of communication more often focused on specifics such as “significant audit findings” (95.9 percent) and less often dealt with big picture/strategic concerns such as “overall corporate control environment” (68.9 percent).

Details

Corporate Governance: The international journal of business in society, vol. 6 no. 1
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 13 April 2012

Siti Rochmah Ika and Nazli A. Mohd Ghazali

The purpose of this paper is to examine the association between audit committee effectiveness and timeliness of reporting. Specifically, the paper investigates whether…

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6239

Abstract

Purpose

The purpose of this paper is to examine the association between audit committee effectiveness and timeliness of reporting. Specifically, the paper investigates whether there is any relationship between effectiveness of an audit committee and submission of audited financial statements to the Indonesian Stock Exchange (IDX).

Design/methodology/approach

Audit committee effectiveness is measured by an index based on the framework developed by DeZoort et al. Timeliness of reporting is defined as the number of days that elapses between a company's financial year‐end and the day on which its audited financial statement is received by the IDX. The sample comprises 211 non‐financial Indonesian listed companies. Multivariate regression analysis was performed to analyse the relationship between audit committee effectiveness and timeliness of reporting.

Findings

The findings show that timeliness of reporting is associated with audit committee effectiveness. This result suggests that audit committee effectiveness is likely to reduce the financial reporting lead time, i.e. the time taken by companies to publicly release audited financial statements to the stock exchange.

Research limitations/implications

The audit committee effectiveness index employed in this study was based on DeZoort et al.'s framework. There could be other aspects of audit committee effectiveness such as the organizational context or multiple‐directorship which had not been addressed in the present study. Thus, future research may consider and examine these other aspects in developing a more comprehensive index.

Practical implications

The findings suggest that audit committee effectiveness is a significant factor ensuring timely submission of audited financial statements. Thus, companies perhaps can re‐look into how to further improve audit committee effectiveness in order to enhance timeliness of financial reporting.

Originality/value

Unlike the majority of prior studies which investigated the association between the presence/absence of audit committee and timeliness of reporting, this study is one of few which examined the relationship between effectiveness of audit committee and timeliness of reporting in an emerging country.

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Article
Publication date: 7 November 2016

Hasan Bin-Ghanem and Akmalia M. Ariff

The purpose of this paper is to examine the effect of board of directors and audit committee effectiveness on the level of internet financial reporting (IFR) disclosure practices.

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1497

Abstract

Purpose

The purpose of this paper is to examine the effect of board of directors and audit committee effectiveness on the level of internet financial reporting (IFR) disclosure practices.

Design/methodology/approach

The sample consists of 152 listed financial companies in Gulf Cooperation Council (GCC) countries. Based on agency theory, the authors posit that board of directors and audit committee effectiveness influence corporate IFR disclosure practice. Content analysis approach, based on an un-weighted index of 35 IFR items is used to measure the level of IFR disclosure. Thus, multiple regression analysis is utilized to analyse the results of this paper.

Findings

The results show that board of directors and audit committee effectiveness has significant influence on the level of IFR disclosure.

Research limitations/implications

One potential limitation of this paper is that the sample is drawn only from the GCC listed financial companies. Therefore, the findings cannot be generalized to other than the financial institutions.

Practical implications

The finding(s) highlights the importance of board of directors and audit committee characteristics in corporate governance and in the development of financial markets that foster IFR disclosure.

Originality/value

This paper extends previous IFR disclosure studies by considering both the role of board of directors and audit committee effectiveness score in examining IFR disclosure.

Details

Journal of Accounting in Emerging Economies, vol. 6 no. 4
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 2 July 2018

Muhammad Jahangir Ali, Rajbans Kaur Shingara Singh and Mahmoud Al-Akra

The purpose of this study is to examine the impact of audit committee effectiveness on audit fees and non-audit service (NAS) fees in a less regulatory environment.

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1350

Abstract

Purpose

The purpose of this study is to examine the impact of audit committee effectiveness on audit fees and non-audit service (NAS) fees in a less regulatory environment.

Design/methodology/approach

The authors construct a composite audit committee effectiveness measure incorporating audit committee independence, diligence, size, financial expertise and the chairperson’s accounting expertise.

Findings

The authors find that audit committee effectiveness has a positive significant impact on both audit fees and NAS fees. This suggests that effective audit committees can hold auditors accountable resulting in better audit quality and consequently higher audit fees.

Originality/value

The link between more effective audit committees with higher NAS purchases can be explained in light of the difference in regulatory requirements providing audit committees with decision rights on the use of NASs, therefore approving more NAS and increasing NASF. Additional tests and robustness analyses confirm the results.

Details

Accounting Research Journal, vol. 31 no. 2
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 1 October 2008

D.P. van der Nest

Audit committees have increasingly been recognised as an integral part of modern control structures and governance practices in both the private sector and public service…

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939

Abstract

Audit committees have increasingly been recognised as an integral part of modern control structures and governance practices in both the private sector and public service. The audit committee is an integral element of public accountability and governance processes. It plays a key role in underwriting the integrity of corporate governance of a government department. The broad aim of this study is to investigate the status and function of audit committees in South African national government departments. The research question investigated in this paper is to determine whether audit committees in the public service are perceived to be effective in assisting accounting officers of government departments to discharge their responsibilities. The study concludes that the majority of audit committees in the South African public service are not perceived as ineffective in the performance of the required functions of committees. Audit committees can still improve their effectiveness in their performance of certain key functions in the areas of oversight over risk management, governance, financial reporting, internal control and support for the external audit function.

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Article
Publication date: 31 May 2019

Ahmed Atef Oussii, Mohamed Faker Klibi and Insaf Ouertani

The purpose of this paper is to analyze the perception held by attendees about the role and the effectiveness of their audit committees.

Abstract

Purpose

The purpose of this paper is to analyze the perception held by attendees about the role and the effectiveness of their audit committees.

Design/methodology/approach

The investigation was conducted via a qualitative methodology through the content analysis of interviews conducted with 33 attendees of audit committee meetings of Tunisian listed companies.

Findings

The findings reveal that audit committees do not have the means to achieve the objectives that they have been given by the legal texts, which are likely to characterize their work as “ceremonial” or “symbolic.” This paper also found that the most significant effects of the audit committee chair’s role come through informal meetings and conversations.

Practical implications

The paper’s findings have policy implications for regulators. Findings from this research may allow regulators to assess whether the audit committee activities in Tunisian companies meet their expectations.

Originality/value

This paper tries to fill a gap in the extant literature and provides meaningful information on activities performed by audit committees and the extent to which they are perceived effective in the eyes of attendees of audit-committee meetings. This study is one of the few field investigations that have analyzed audit committeeseffectiveness in emerging markets through interviews with attendees involved in audit-committee processes.

Details

Managerial Auditing Journal, vol. 34 no. 6
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 3 May 2016

Inaam ZGARNI, Khmoussi HLIOUI and Fatma ZEHRI

A steady stream of literature has examined relationships between audit committee effectiveness, audit quality and financial reporting quality. The purpose of this paper is…

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3836

Abstract

Purpose

A steady stream of literature has examined relationships between audit committee effectiveness, audit quality and financial reporting quality. The purpose of this paper is to connect these various streams of research to provide an empirical evidence from an Arabic emergent country namely Tunisia. This study examines the role of audit committee effectiveness and audit quality on financial reporting quality particularly to mitigate the earnings management in the Tunisian companies before and after financial security law adoption.

Design/methodology/approach

The study uses ordinary least squares regression model to investigate the effect of audit committee characteristics, audit quality attributes and the interaction between these two overseeing mechanisms on earnings management for a sample of 29 non-financial listed Tunisian firms during the period 2001-2009.

Findings

The results document a substitute effect between the presence of Big Four auditor and effective audit committee in order to reduce the discretionary accruals before the enforcement of law no. 2005-96 dealing with the financial securities. The authors find a complementarity link between the score of audit committee’s effectiveness and auditor industry specialization’s to constrain earnings management. Finally, the findings show a complementary relation between audit committee’s effectiveness and audit tenure, after the passage of the law.

Research limitations/implications

This study shows the value of considering the institutional setting in governance research. This paper is restricted to firms in the Tunisia from 2001 to 2009. Future research should investigate this issue in other settings and periods.

Practical implications

This study is important to practitioner and academic literature, policy makers and professional accounting bodies as it shows that legislative reforms can enhance companies to adopt good governance practices in emerging countries. The results also give useful information to investors in examination the effect of audit committee characteristics and audit quality on earnings quality. Another interesting practical focus of this study is to assess how successful was the implementation of financial security law in improving audit transparency and support shareholder involvement in the audit process.

Originality/value

The results suggested that governance regulation is a substitute for strong governance mechanisms in both the pre- and post-law periods.

Details

Journal of Accounting in Emerging Economies, vol. 6 no. 2
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 25 May 2010

Johnathan Magrane and Sue Malthus

The purpose of this paper is to examine the conditions and processes affecting the operation of an audit committee within the context of a New Zealand district health board (DHB).

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5077

Abstract

Purpose

The purpose of this paper is to examine the conditions and processes affecting the operation of an audit committee within the context of a New Zealand district health board (DHB).

Design/methodology/approach

The methodology used in this paper was exploratory and qualitative, including the analysis of secondary data and semi‐structured interviews.

Findings

Using the New Zealand Auditor‐General's best practice guidelines for a public sector audit committee as a benchmark, the paper finds that the DHB rates moderately well in terms of “effectiveness potential”. However, factors are identified concerning the audit committee members' independence, competence, tenure, and remuneration, which impinge upon the overall effectiveness of the audit committee. Despite apparent shortcomings in these areas, the informal networks between audit committee members and management serve to maximise the “realisation” of what potential effectiveness exists. As a result, the audit committee is perceived by its stakeholders (management, auditors, and committee members) as being a valuable tool to assist the DHB board in achieving proper governance.

Practical implications

There are no specific regulatory or legislative requirements for establishing audit committees in the New Zealand public sector. The findings from this paper may be useful to public sector entities that are considering establishing an audit committee and to entities, including the one in this paper, that wish to improve the effectiveness of their existing audit committees.

Originality/value

Most studies of audit committees to date have focuses on corporate sector entities; this is the first qualitative paper of an audit committee of a public sector entity in New Zealand.

Details

Managerial Auditing Journal, vol. 25 no. 5
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 12 March 2018

Juma Bananuka, Stephen Korutaro Nkundabanyanga, Irene Nalukenge and Twaha Kaawaase

The purpose of this study is to investigate the contribution of internal audit function and audit committee effectiveness on accountability in statutory corporations (SCs).

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1419

Abstract

Purpose

The purpose of this study is to investigate the contribution of internal audit function and audit committee effectiveness on accountability in statutory corporations (SCs).

Design/methodology/approach

This study is cross sectional and correlational. Data have been collected through a questionnaire survey of 52 SCs in Uganda through their Chief Internal Auditors and Chief Finance Officers. Data have been analysed using Statistical Package for Social Sciences.

Findings

The internal audit function significantly contributes to accountability of SCs in Uganda and audit committee effectiveness is not where effective internal audit is present in such organisations. However, audit committee effectiveness significantly contributes to accountability when an internal audit function is not present.

Research limitations/implications

The use of hierarchical regression is prone to problems associated with sampling error. However, the likelihood of these problems is mitigated by the interface with data.

Originality/value

Whereas hitherto both internal audit function and audit committee effectiveness had been viewed as explanations of accountability, this study only confirms the internal audit function as a significant predictor of SCs’ accountability relative to audit committee effectiveness.

Details

Journal of Financial Reporting and Accounting, vol. 16 no. 1
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 7 March 2016

Hafiza Aishah Hashim and Muneer Amrah

The purpose of this study is to determine whether there is any difference in the association among the board of directors, audit committee effectiveness and the cost of…

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1821

Abstract

Purpose

The purpose of this study is to determine whether there is any difference in the association among the board of directors, audit committee effectiveness and the cost of debt between the family- and non-family-owned companies in the Sultanate of Oman.

Design/methodology/approach

This study uses a panel data set that has multiple observations on the same economic units. Each element has two subscripts: the group identifier, i (68 companies listed on the Muscat Securities Market), and within the group index denoted by t, which identifies time (2005-2011). The regression model of this study is based on the random effects model, which, according to the Hausman and Breusch-Pagan (LM) (Breusch and Pagan, 1980) tests, is an appropriate model.

Findings

This study finds that the association between a board of directors’ effectiveness and cost of debt is negative and significant for the full sample and non-family firms. This relationship, however, is weak and not significant for family firms. Additionally, this study indicates that audit committee effectiveness has a significant effect on the cost of debt based on the full sample and family firms, but is not significant for non-family firms.

Originality/value

This study examines firms in the Sultanate of Oman, where family ownership control is common. Based on a framework conceptualized according to the agency theory, using data from Oman enables a comparison between family and non-family firms with respect to the effect of the board of directors’ and audit committee’s characteristics as a composite measure. This composite measure captures their combined effect on the propensity of the cost of debt.

Details

Managerial Auditing Journal, vol. 31 no. 3
Type: Research Article
ISSN: 0268-6902

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