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Article
Publication date: 7 September 2021

Azhaar Lajmi and Mdallelah Yab

The purpose of this paper is to examine and analyze the impact of governance internal mechanisms on audit report lag. The characteristics of governance used in this study…

Abstract

Purpose

The purpose of this paper is to examine and analyze the impact of governance internal mechanisms on audit report lag. The characteristics of governance used in this study are selected by looking at recent literature review.

Design/methodology/approach

Governance internal mechanisms were proxied by the audit committee and director's board characteristics. To test the impact of these characteristics, the authors used a sample of 47 Tunisian companies listed on the Tunis Stock Exchange (BVMT) during the period from 2014 to 2019. The generalized method of moments (GMM) method of dynamic panel multivariate analysis was used to analyze this study.

Findings

The results showed that most corporate governance attributes have a significant effect on audit report lag. Specifically, the audit committee diligence and the audit committee expertise have significant and positive effect on audit report lag. But the diligence of the board has significant and negative effect on audit report lag. However, this study finds no evidence that the audit committee independence, the size, independence and diligence of director's board are associated with the audit report lag. In addition, the results of this study also show that there is a significant effect of some control variables such us gender and performance.

Practical implications

The findings of this article will help to fill the knowledge gap in relation with this research issue in developing countries especially in Tunisian context, because this investigation exposed more than ever the vital role of auditor on the audit report lag. This research will make investors and stakeholders aware of the importance of governance mechanisms put in place in firms to reduce audit report delays in emerging markets, like Tunisia. Then, this work can help researchers and encourage them to deeply and broadly investigate this issue on other emerging markets.

Originality/value

This study extends the existing literature by examining the relationship between different mechanisms of corporate governance and audit delay in an emerging context and which has been very little explored in this sense namely in the Tunisian context. On the empirical level, the study contributes by using a dynamic panel that has not been mentioned much in previous research. Dynamic panel models include lagged dependent variables. The presence of these variables makes it possible to model a partial adjustment mechanism.

Details

EuroMed Journal of Business, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1450-2194

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Article
Publication date: 24 August 2021

R. Narayanaswamy, K. Raghunandan and Dasaratha V. Rama

This study aims to examine the resignations of Indian audit committee directors after a systemic shock (failure of Satyam Computer Services Ltd.).

Abstract

Purpose

This study aims to examine the resignations of Indian audit committee directors after a systemic shock (failure of Satyam Computer Services Ltd.).

Design/methodology/approach

The authors develop the research questions based on interviews with company directors and audit partners, in addition to economic theory. The authors then use archival data to test the research questions.

Findings

The authors find that social and peer pressure is a very important factor in explaining such departures and provides the basis for some counter-intuitive empirical results, for example, directors were less likely to resign from companies audited by Indian affiliates of PricewaterhouseCoopers even though Satyam was audited by one such auditor and ownership by founding families was not associated with director departures.

Research limitations/implications

Going beyond economic theory and analyzes can be useful in examining issues related to corporate boards and audit committees.

Practical implications

Regulators should consider requiring disclosure about director attendance percentages, in addition to the number of meetings, at audit committee – and, perhaps, other board sub-committee – meetings.

Social implications

Caution is warranted when using results from the USA and other Anglo-Saxon countries to address governance-related issues in India or other Asian countries.

Originality/value

A triangulation of economic theory and societal norms enables us to gain valuable insights about the resignations of audit committee directors in India.

Details

Managerial Auditing Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0268-6902

Keywords

Content available
Article
Publication date: 24 August 2021

Wan Zurina Nik Abdul Majid, Effiezal Aswadi Abdul Wahab, Hasnah Haron, Dian Agustia and Mohammad Nasih

The study examines the relationship between nonaudit services (NAS) and accruals quality in Malaysia. The study also considers several important characteristics of audit…

Abstract

Purpose

The study examines the relationship between nonaudit services (NAS) and accruals quality in Malaysia. The study also considers several important characteristics of audit committee as the determinant for accruals quality. Next, the study examines whether these characteristics mitigate the relationship between NAS and accruals quality.

Design/methodology/approach

The study employs descriptive analysis, univariate tests and multivariate regression to investigate the potential effect of NAS on acruals quality. Data for audit committee characteristics were hand collected from annual reports downloaded from Bursa Malaysia's website.

Findings

Based on 1,118 firm-year observations for the period 2009–2011, the study finds that NAS negatively impact accruals quality. This empirical result indicates that the economic bond that is created between auditors and clients restricts the auditors from performing their duty objectively. A fully independent audit committee weakens the negative relationship between NAS and auditor independence.

Research limitations/implications

The sample period represents a limitation since it only covers three years of data. This limitation is largely driven by the nature of data collection of NAS fees.

Practical implications

These results contribute to Malaysia's policy deliberation to account for the effects of NAS on auditor independence and the oversight role of an audit committee. This study contributes to theoretical perspectives on accruals quality and corporate governance in Malaysia.

Originality/value

The novelty of this research, coupled with institutional data in Malaysia, claims the originality of this research.

Details

Asian Journal of Accounting Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2443-4175

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Article
Publication date: 3 August 2021

Ahmad Yuosef Alodat, Zalailah Salleh, Hafiza Aishah Hashim and Farizah Sulong

This study aims to assess the effect of director board and audit committee attributes and ownership structure on firm performance. In general, resource dependency and…

Abstract

Purpose

This study aims to assess the effect of director board and audit committee attributes and ownership structure on firm performance. In general, resource dependency and agency theories have underlined the superior performance of firms equipped with stronger Corporate Governance (CG) versus those of deficient governance. Concurrently, the study delineated the provisions of ownership structure provision, specifically foreign ownership and institutional ownerships, thus describing the component denoting the structural significance in explicating firm performance.

Design/methodology/approach

The current study implemented an empirical approach involving the construction of extensive CG measures thus, subjected to 81 non-financial firms listed on the Amman Stock Exchange spanning the period of 2014–2018.

Findings

The current study identified the positive and significant relationship between the board of directors and audit committee characteristics with the firm performance measures tested, namely, return on equity (ROE) and Tobin’s Q. In terms of ownership structure, both foreign and institutional ownerships yielded a significant and positive relationship with ROE. Meanwhile, Tobin’s Q led to an insignificant and negative relationship between both ownership types and firm performance measures.

Practical implications

The analytical outcomes substantiate the possibility of enhanced performance shown by growing global firms because of the implementation of CG mechanisms, specifically because of the practices resulting in minimised agency costs.

Originality/value

The current study offers novel evidence detailing the impact of CG effectiveness towards performance and its implementation in emerging markets following the minimal amount of scholarly efforts on the topic. It is a timely contribution towards the current understanding of the relationship linking governance and performance for the purpose of ensuring the adoption and imposition of a strong corporate governance code by the government.

Details

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

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Article
Publication date: 6 August 2021

Ahsan Habib, Md. Borhan Uddin Bhuiyan and Julia Y.H. Wu

This paper aims to investigate whether audit committee ownership (consisting of both equity holdings and option holdings) is associated with the cost of equity capital.

Abstract

Purpose

This paper aims to investigate whether audit committee ownership (consisting of both equity holdings and option holdings) is associated with the cost of equity capital.

Design/methodology/approach

This paper uses regression analysis to examine the association between audit committee ownership and the cost of equity capital. The data set consists of 2,825 firm-year observations for companies listed on the ASX between 2001 and 2015. This paper also conducts tests to explore the mediating effects of financial reporting quality, firm performance and the risk of reporting problems, on the relation between audit committee ownership and cost of equity capital.

Findings

The analyses reveal that audit committee ownership reduces the firm’s cost of equity and, thereby, support the incentive alignment view. However, the association is driven primarily by audit committee equity ownership, with option holdings having an insignificant effect. This paper also finds that firm performance mediates the association between audit committee ownership and the cost of equity capital.

Practical implications

Findings of the existing corporate governance research relating to the cost of equity capital and audit committee ownership remain sparse in the context of “comply-or-explain” types of regulatory environment, like that of Australia. The findings indicate that principle-based discretionary governance arrangements, e.g. compensating audit committee members with company equity, may bring benefits to firms in terms of cheaper financing. Regulators, scholars and practitioners are invited to consider further the comprehensive implications of the structure and transparency of audit committee incentives on the effective functioning of security markets.

Originality/value

The effects of audit committee ownership on the cost of equity capital are an issue of direct economic consequence for equity investors. The main finding of this study, namely, that a firm with higher audit committee share ownership is likely to benefit from a lower cost of equity capital, therefore adds value to the limited extant literature.

Details

Managerial Auditing Journal, vol. 36 no. 5
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 28 July 2021

Laurence Ferry and Henry Midgley

The study focusses on explaining why advocates for reform to state audit in the United Kingdom (UK) in the early 1980s, focussed on improving the links between the new…

Abstract

Purpose

The study focusses on explaining why advocates for reform to state audit in the United Kingdom (UK) in the early 1980s, focussed on improving the links between the new National Audit Office (NAO) and Parliament, rather than on traditional notions of audit independence. The study shows how this focus on the auditor's link to Parliament depends on a particular concept of liberty and relates this to the wider literature on the place of audit in democratic society.

Design/methodology/approach

Understanding the issue of independence of audit in protecting the liberties and rights of citizens needs addressed. In this article, the authors investigate the creation of audit independence in the UK in the National Audit Act (1983). To do so, the authors employ a neo-Roman concept of liberty to historical archives ranging from the late 1960s to 1983.

Findings

The study shows that advocates for audit reform in the UK from the 1960s to the 1980s were arguing for an extension to Parliament's power to hold the executive to account and that their focus was influential on the way that the new NAO was established. Using a neo-Roman concept of liberty, the authors show that they believed Parliamentary surveillance of the executive was necessary to secure liberty within the UK.

Research limitations/implications

The neo-Roman republican concept of liberty extends previous studies in considering the importance of audit for public accountability, the preservation of liberty and democracy.

Practical implications

Public sector audit can be a fundamentally democratic activity. Auditors should be alert to the constitutional importance of their work and see parliamentary accountability as a key objective.

Originality/value

The neo-Roman concept of liberty extends previous studies in considering the importance of audit for public accountability, preservation of liberty and democracy.

Details

Accounting, Auditing & Accountability Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0951-3574

Keywords

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Article
Publication date: 23 July 2021

Li Ma, Yidi Wang and Yun Teng

China's agricultural production trusteeship is characterized by the organic link between household operation of small-scale peasant economy and agricultural socialized…

Abstract

Purpose

China's agricultural production trusteeship is characterized by the organic link between household operation of small-scale peasant economy and agricultural socialized services, which releases agricultural development vitality and promotes agricultural modernization. As one of the agricultural production trusteeship modes, the whole process trusteeship is suitable for the actual situation of China's aging population and labor force transfer. This paper aims to construct an evolutionary game model containing multistakeholder to explore the behavior decisions through numerical simulation and to provide useful suggestions for the formation of a positive and stable trusteeship relationship and the sound development of the whole process trusteeship of agricultural production.

Design/methodology/approach

The paper incorporates village committees, service organizations and farmers into the same research framework, selects “guarantee + dividends” as the income distribution method and applies the evolutionary game method to analyze behavioral choices and evolutionary paths of stakeholders. By constructing the expectation function, establishing the replicator dynamic equations and analyzing the tripartite evolutionary stability strategy, the authors explore the factors that affect the stakeholders’ strategy choice and determine asymptotically stable points and stability conditions.

Findings

(1) There is a game relationship among village committees, farmers and service organizations in the whole process trusteeship of agricultural production, asymptotically stable points (0,0,1) and (1,1,1) are obtained through calculation. (2) The proportion of stakeholders' strategy choice, the weight of the whole process trusteeship of agricultural production in the performance appraisal of the village committee, the village committee's supervision cost, the village committee's reputation effect and the penalty for false dividends of the service organization will affect the speed at which the curve representing the tripartite relationship approaches two asymptotically stable points.

Research limitations/implications

The countermeasures proposed in the paper have excellent reference value. (1) For areas that have realized the project: Village committees can solve the trusteeship problems exposed in the initial areas and improve farmers' satisfaction with the project. (2) For areas that have not realized the project: Those regions will receive more experience references and enhance their confidence in this project. The limitation of the paper is that it takes the main grain-producing areas in only the three northeastern provinces of China as the research object. The next research object will be extended to the whole country.

Practical implications

This paper propose strategies for realizing the orderly operation of the whole process trusteeship of agricultural production: first, increase the proportion of stakeholders' strategy choices; second, reduce the village committee's supervision cost; third, increase the weight of the whole process trusteeship of agricultural production in the performance appraisal of the village committee; fourth, improve the village committee's reputation effect; fifth, increase the penalty for false dividends of the service organization.

Originality/value

Agricultural production trusteeship is in its initial stage in China. The interest relationships between stakeholders are not yet clear. The paper innovatively applies the evolutionary game method to the research field of the whole process trusteeship of agricultural production. According to conditions in China, based on ensuring the guaranteed income, the paper introduces the dividend income variable and establishes a tripartite game model of village committees, service organization and farmers. The paper provides suggestions for the orderly and healthy development of China's agricultural production trusteeship and provides experience for the operation of other modes of agricultural production trusteeship.

Details

Kybernetes, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0368-492X

Keywords

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Article
Publication date: 1 August 1995

Ian P. Dewing and Bernard C. Williams

Audit committees have a relatively long history dating back to thenineteenth century. It is only in recent years that their use has beenpopularized again in the private…

Abstract

Audit committees have a relatively long history dating back to the nineteenth century. It is only in recent years that their use has been popularized again in the private sector. Fundamentally, it is often argued that audit committees exist to mediate between executive directors and auditors while providing an overall enhancement of corporate accountability. One of the recent effects of the drive to incorporate business methods into other sectors has been the establishment of audit committees. It does, however, pose the question of the role of these committees which are operating in a different context from their origins. Looks at the operation of audit committees in a defined sector, namely universities. Using a postal questionnaire, all directors of finance (or equivalent) in UK universities were surveyed to establish whether or not audit committees existed in their institutions, the purpose being to determine the extent of audit committees, the reasons why they have or have not been established, and the advantages and problems encountered with them. One interesting result that arose with implications for accountability and governance was that in universities the stewardship and strategic policy‐making functions are generally separate and that audit committees report only on the former. This is in contrast to the situation in the private sector where both functions are generally combined in the activities of the board of directors. Because there is considerable overlap between the membership of audit committees and the boards of directors, it could be argued that this provides the potential for a greater degree of accountability and governance than currently exists in universities.

Details

Managerial Auditing Journal, vol. 10 no. 6
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 August 2003

Zabihollah Rezaee, Kingsley O. Olibe and George Minmier

An increasing number of earnings restatements along with many allegations of financial statement fraud committed by high profile companies (e.g. Enron, WorldCom, Global…

Abstract

An increasing number of earnings restatements along with many allegations of financial statement fraud committed by high profile companies (e.g. Enron, WorldCom, Global Crossing, Adelphia) has eroded the public confidence in corporate governance, the financial reporting process, and audit functions. The Sarbanes‐Oxley Act of 2002 was an attempt to regain confidence and trust in corporate America and the accounting profession. The Act addresses corporate scandals and the perceived crisis in the auditing profession. Some of its provisions relate to the audit committee oversight function over corporate governance, financial reporting, internal control structure, internal audit functions, and external audit services. This study examines three types of audit committee disclosures: the annual report of the audit committee; reporting of the audit committee charter in the proxy statement at least once every three years; and disclosure in the proxy statement of whether the audit committee had fulfilled its responsibilities as specified in the charter. This study conducts a content analysis on audit committee disclosures of Fortune 100 companies.

Details

Managerial Auditing Journal, vol. 18 no. 6/7
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 28 June 2013

Doreen Lilienfeld, John Cannon, Amy Gitlitz Bennett and George Spera

The purpose of this paper is to explain the amendments to the listing standards of the New York Stock Exchange (NYSE) and the NASDAQ Stock Market (Nasdaq), which were…

Abstract

Purpose

The purpose of this paper is to explain the amendments to the listing standards of the New York Stock Exchange (NYSE) and the NASDAQ Stock Market (Nasdaq), which were approved by the Securities and Exchange Commission (the SEC) on January 11, 2013 to implement the SEC's final rules on the independence of compensation committees and their selection of advisors pursuant to Rule 952 of the Dodd‐Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd Frank).

Design/methodology/approach

After a summary of notable provisions, the paper explains effective dates and respective Nasdaq and NYSE listing standards pertaining to compensation committee compensation; director independence standards, advisors, and charters; certain exemptions for foreign issuers; exemptions for certain types of companies and partnerships; and recommended next steps for companies that are subject to the amended listing standards.

Findings

Over the past few years, the independence of compensation committees and their advisors has been a hot button corporate governance issue. Dodd‐Frank prohibits national securities exchanges from listing any equity security of an issuer that is not in compliance with the exchanges' compensation committee independence and advisor requirements.

Practical implications

The listing standards generally become effective on July 1, 2013; however, listed companies have until the earlier of: their first annual meeting after January 15, 2014; or October 31, 2014, to comply with certain requirements including the independence structure of their compensation committees.

Originality/value

The paper provides practical advice from experienced financial services lawyers.

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