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Article
Publication date: 7 March 2016

Hichem Khlif and Khaled Samaha

The purpose of this paper is to examine the association between audit committee activity, external auditor’s size and internal control quality (ICQ) in the Egyptian setting. It…

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Abstract

Purpose

The purpose of this paper is to examine the association between audit committee activity, external auditor’s size and internal control quality (ICQ) in the Egyptian setting. It also explores how external auditor’s size moderates the relationship between audit committee activity and ICQ.

Design/methodology/approach

To obtain relevant information about ICQ in Egypt, the authors conducted a survey among external auditors using an internal control checklist.

Findings

Results show that audit committee activity has a significant positive effect on ICQ. In addition, Big 4 auditors contribute significantly to the improvement of the ICQ in the Egyptian setting. Finally, the association between audit committee activity and ICQ is more pronounced when an organisation is audited by a Big 4 audit firm.

Originality/value

The results this paper demonstrate that Big 4 auditors play a governance role in weak legal environment as exists in Egypt by strengthening the effectiveness of audit committee meetings. The findings also have policy implications for Egyptian standard-setters and other emerging economies characterised by an under-developed and poorly regulated audit market, with respect to the development of internal auditing standards.

Details

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

Keywords

Article
Publication date: 3 September 2020

Ahmed Atef Oussii and Mohamed Faker Klibi

De facto use of International Financial Reporting Standards (IFRS) is a particular form of voluntary compliance with International Accounting Standards (IAS). It is practiced when…

Abstract

Purpose

De facto use of International Financial Reporting Standards (IFRS) is a particular form of voluntary compliance with International Accounting Standards (IAS). It is practiced when an enterprise uses a number (and not all) of international standards as a complement to overcome the unachieved nature of local generally accepted accounting principles. The purpose of this paper is to analyze, at first, whether the financial expertise of Tunisian audit committee’s members is associated with de facto use of IFRS. Second, it explores to what extent and in what direction this association evolves when the factor auditor’s size is introduced as a moderator variable.

Design/methodology/approach

Data spanning a seven-year period (2012–2018) was hand-collected for a sample of 497 firm-year observations. Further, regression analysis was used to test the study’s hypothesis.

Findings

Findings show that the proportion of financial experts who sit on the audit committee is positively associated with the de facto use of IFRS. Besides, the association between audit committee members’ financial expertise and the voluntary use of IFRS is more pronounced when the company is audited by at least one BIG 4 audit firm.

Practical implications

The paper’s findings have implications for regulatory bodies and standards setters who are concerned with the functioning of the audit committee, especially when it comes to enhancing the quality of the financial statements. The results also shed light on the role of financial experts on the audit committee and Big 4 auditors to enforce the de facto use of IFRS.

Originality/value

The findings of this study contain an important message for the drift toward national de jure convergence with IAS.

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 7
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 11 July 2018

Sara Abdallah

The purpose of this paper is to investigate, in an Egyptian context, the external auditor type (Big 4 vs local) implications on reporting quality proxied by discretionary accruals…

Abstract

Purpose

The purpose of this paper is to investigate, in an Egyptian context, the external auditor type (Big 4 vs local) implications on reporting quality proxied by discretionary accruals (DA) and also examine whether auditor type impacts the market’s pricing of DA, where pricing is considered a proxy for the perceived DA quality.

Design/methodology/approach

The sample period is 2012–2015, that is meant to be post the Egyptian revolution financial crisis; all Egyptian stock exchange (EGX) listed firms (except banks and financial institutions) are considered. DA are estimated using modified Dichev and Dechow’s (2002) model (McNicholas, 2002). Ordinary least squares regression tests are used to investigate the external auditor type implications on DA level and the related EGX investors’ pricing.

Findings

The findings generally show the external auditor’s minimal role in mitigating DA. Moreover, the findings reflect the EGX investors’ negligence and/or lack of confidence in regards to DA and external auditor type factors in stock pricing.

Practical implications

The paper findings highlight to regulators the need for effective monitoring of audit firms earnings management mitigation performance to help reinforce investor confidence in financial reporting quality.

Originality/value

This paper is the first that investigates the external auditor monitoring mechanism implications on investors’ perceptions of earnings quality in Egypt. The paper findings would provide important contributions, particularly post the Egyptian revolution crisis, where the EGX market is trying to restore the investors’ confidence.

Details

Journal of Accounting in Emerging Economies, vol. 8 no. 3
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 24 June 2019

Khurram Ashfaq and Zhang Rui

The purpose of this paper is to investigate the internal control disclosure (ICDISC) practices in South Asia and compare those disclosure practices across enforced setting (India…

1556

Abstract

Purpose

The purpose of this paper is to investigate the internal control disclosure (ICDISC) practices in South Asia and compare those disclosure practices across enforced setting (India) versus comply or explain setting (Pakistan and Bangladesh). Further, whether the audit firm size moderates the relationship between ICDISC practices and board & audit committee effectiveness.

Design/methodology/approach

To achieve these objectives, a sample of 100 non-financial companies was selected from Pakistan and India for three years’ period (2013-2015), whereas 93 companies were selected from Bangladesh based on market capitalization. The ICDISC index has been used which is based on the COSO framework.

Findings

Results of univariate analysis show that public sector companies in South Asia tend to disclose significantly more internal control information as compared to private sector companies. In terms of enforcement variable, the results of Mann–Whitney test show that companies listed in enforced setting have disclosed significantly greater extent of overall as well as individual categories of ICDISC as compared to companies listed in comply or explain setting. Based on multivariate analysis results for overall sample, it was found that board and audit committee characteristics and ownership by government have positive significant effect on ICDISC except representation of female or foreigner on audit committee which was found negatively significant. In addition to this, listing on foreign stock exchange and enforcement effect emerged as significant variables to influence ICDISC. Finally, the results of additional analysis state that the role of board and audit committee for influencing ICDISC has been moderated by the external auditor size in South Asia. In addition, enforcement variable is highly positively significant for companies having non-big four audit firm.

Research limitations/implications

These results imply that enforcement variable acts as an important alternative external control mechanism when companies do not have big four audit firm as their external auditors.

Originality/value

This is very first study on ICDISC in South Asia which explores the effect of enforcement and governance on ICDISC practices of firms. It also contributes toward the literature that the regulation on reporting of internal control can be effective in developing country only if there is strong penalty for non-compliance by regulatory authorities.

Details

Journal of Financial Reporting and Accounting, vol. 17 no. 2
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 4 April 2019

Hichem Khlif and Khaled Samaha

This paper aims to examine the relationship between board independence and internal control quality (ICQ) in Egypt and investigate whether CEO duality moderates such an…

Abstract

Purpose

This paper aims to examine the relationship between board independence and internal control quality (ICQ) in Egypt and investigate whether CEO duality moderates such an association.

Design/methodology/approach

A survey among external auditors is used to assess ICQ among Egyptian listed firms over the period of 2007-2010.

Findings

Findings show that board independence does not have a significant positive effect on ICQ. However, when testing for the moderating effect of CEO duality on such a relationship, the authors document that the association becomes positive and significant under combined board leadership structure, whereas it is negative under separated leadership structure.

Originality/value

The authors’ results demonstrate that CEO duality plays a governance role in weak legal environment like Egypt by strengthening board independence role in increasing ICQ.

Details

International Journal of Law and Management, vol. 61 no. 2
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 25 January 2021

Hela Gontara and Hichem Khlif

The purpose of this paper is to examine the association between audit report lag (ARL) and tax avoidance and test whether external auditor type affects this relationship.

Abstract

Purpose

The purpose of this paper is to examine the association between audit report lag (ARL) and tax avoidance and test whether external auditor type affects this relationship.

Design/methodology/approach

ARL is measured as the number of days from fiscal year-end to the date of the auditor’s report, while tax avoidance is measured using effective tax rate.

Findings

Using a sample of 45 South African companies over the period of 2010–2013, the authors document that ARL is positively associated with tax avoidance and this relationship remains positive when the company is audited by a Big-4 audit firm and not significant when the company is audited by a non-Big-4.

Originality/value

The authors’ findings have important implications for auditors aiming to reduce audit risk as they may consider the impact of tax avoidance and pay more attention to companies with a high degree of tax avoidance.

Details

Journal of Financial Crime, vol. 28 no. 3
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 12 March 2018

Ahmed Atef Oussii and Neila Boulila Taktak

The purpose of this paper is to investigate whether there is any relationship between the effectiveness of an audit committee and the financial reporting timeliness of Tunisian…

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Abstract

Purpose

The purpose of this paper is to investigate whether there is any relationship between the effectiveness of an audit committee and the financial reporting timeliness of Tunisian listed companies as proxied by external audit delay (AD). Analysis focuses on five audit committee characteristics: authority, financial expertise, independence, size and diligence.

Design/methodology/approach

Empirical tests address 162 firm-year observations drawn from Tunisian listed companies during 2011-2013.

Findings

Multivariate analyses indicate that audit committees with members who have financial expertise are significantly associated with shorter AD. Thus, the results suggest that audit committee financial expertise contributes to the improvement of financial statements’ timeliness.

Research limitations/implications

The audit committee attributes examined in this study were based on DeZoort et al. (2002) framework. There could be other aspects of audit committee effectiveness such as audit committee tenure and audit committee chair characteristics, which were not addressed in the present study. Thus, future research may consider and examine these other components of audit committee effectiveness.

Practical implications

Findings have managerial implications. Companies can re-look into how to further improve audit committee composition in order to enhance the timeliness of financial reporting. The issues of audit committee effectiveness and timely reporting also affect regulators and policy makers since they need to play a role in the establishment of effective audit committees and the improvement of financial reporting timeliness.

Originality/value

This study is one of few that have examined the impact of audit committee effectiveness on ADs in an emerging market country. Findings lend credence to the belief that audit committee members’ financial expertise enhances the quality of financial reporting by firms in a North African market criticized for the lack of maturity of its corporate governance system (Klibi, 2015; Fitch Ratings, 2009).

Details

African Journal of Economic and Management Studies, vol. 9 no. 1
Type: Research Article
ISSN: 2040-0705

Keywords

Article
Publication date: 11 April 2022

Salem Alhababsah

This study aims to explore the opinions of audit committee (AC) members on the extent to which they fulfil the oversight role vested in them by the Jordanian Corporate Governance…

Abstract

Purpose

This study aims to explore the opinions of audit committee (AC) members on the extent to which they fulfil the oversight role vested in them by the Jordanian Corporate Governance Code (JCGC).

Design/methodology/approach

This study uses semi-structured interviews with 18 AC members.

Findings

The findings suggest that although ACs largely meet the JCGC’s recommendations, their substantive oversight role in practice is limited. In particular, the responses indicate that ACs suffer from a lack of real power, especially concerning the appointment (or removal) of external auditors and the evaluation of internal control. Moreover, ACs have no actual role in issues deemed important for financial reporting quality (e.g. reviewing management estimates and evaluating chief financial officer (CFOs) and internal audit executives).

Originality/value

This study provides rich insights into ACs’ oversight processes in a setting outside the Anglo-Saxon corporate governance model where knowledge is scant on the ACs’ real function. Hence, the study injects the literature with new qualitative-based evidence from a peculiar civil law country. Also, Jordan has spent time and energy trying to strengthen corporate governance practices to boost investors’ confidence. However, the interviewees’ responses indicate that the oversight role of the AC is still far from what the regulators anticipate. Therefore, the findings offer useful feedback for regulators to think more deeply about the current governance regulations. The feedback from this study can be extended to other developing countries with similar institutional environments, especially countries in the Middle East and North Africa.

Details

Corporate Governance: The International Journal of Business in Society, vol. 22 no. 6
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 3 December 2021

Tuan Mastiniwati Tuan Mansor, Akmalia Mohamad Ariff, Hafiza Aishah Hashim and Abdul Hafaz Ngah

This study aims to examine the roles of perceived organisational support (POS), attitude and self-efficacy in understanding the external whistleblowing intentions among senior…

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Abstract

Purpose

This study aims to examine the roles of perceived organisational support (POS), attitude and self-efficacy in understanding the external whistleblowing intentions among senior auditors through the lens of stimulus–organism–response theory.

Design/methodology/approach

This study uses data from 119 senior auditors in audit firms in Malaysia. POS is predicted to be a stimulus factor from the external environment that affects the attitude and self-efficacy (organism) of the auditors and reassures them to act to whistleblow (response).

Findings

POS has a significant impact on self-efficacy and on attitude. Self-efficacy is shown as a significant mediator between POS and external whistleblowing intentions, but there is no statistical support for self-efficacy having a mediating effect on the relationship between the attitude of senior auditors and external whistleblowing intentions.

Practical implications

The findings can assist accounting professional bodies in understanding the psychological behaviours of auditors that contribute to their intention to shine a light on wrongdoing in audit firms and in providing a better insight into the critical factors that could influence auditors to whistleblow.

Originality/value

This study is among the earliest to investigate the application of stimulus–organism–response theory in whistleblowing, and hence it illustrates how the theory can be applied in studies on the ethical behaviours of actors in professional careers. The findings shed light on the role of self-efficacy as a significant mediator between POS and external whistleblowing intentions.

Details

Corporate Governance: The International Journal of Business in Society, vol. 22 no. 4
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 14 March 2018

Keryn Chalmers, David Hay and Hichem Khlif

In 2001, the US moved to regulate internal control reporting by management and auditors. While some jurisdictions have followed the lead of the US, many others have not. An…

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Abstract

In 2001, the US moved to regulate internal control reporting by management and auditors. While some jurisdictions have followed the lead of the US, many others have not. An important question, therefore, is the relevance of internal control to stakeholders. The more specific issue of the benefits of US-style regulation of internal control reporting is also topical. We review studies on the determinants of internal control quality and its economic consequences for stakeholders including investors, creditors, managers, auditors and financial analysts. We extend previous reviews by focusing on US studies published since 2013 as well as all non-US studies investigating IC quality including countries regulating IC disclosure as well as unregulated settings and both developed and developing economies. In doing so, we identify research questions where evidence remains mixed and new directions in which there are research opportunities.

Three main insights arise from our analysis. First, evidence on the economic consequences of internal control quality suggests that the quality of internal control can have a significant effect on decision making by users of financial information. Second, the results of research on the empirical association between ownership structure, certain board characteristics and internal control quality is generally mixed. Empirical evidence concerning the association between audit committee characteristics and internal control quality generally supports a positive and significant association. Finally, while studies in non-US jurisdictions are increasing, opportunities remain to explore the determinants and consequences of internal control in other jurisdictions. Our review provides evidence for policy makers of whether there are benefits from requiring management and auditors to report on internal control over financial reporting.

Details

Journal of Accounting Literature, vol. 42 no. 1
Type: Research Article
ISSN: 0737-4607

Keywords

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