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The confidence in the qualifications and independence of the audit activities and professionals has been lost due to the financial scandals that have arisen over time. These scandals in the accounting and auditing fields caused both enterprises and investors to suffer from large amounts of losses and thus the need for reliable financial statements and corporate governance increased.

Both investors and decision-makers need independent assurance to achieve transparent, reliable, and impartial financial information. The fulfillment of this requirement is possible through independent auditing activity and independent audit firms. Business management shall carry out the selection of independent auditors based on various criteria (fee, reputation, audit team, relations, etc.). In addition, it may also be necessary to periodically change an independent audit firm due to rotation or other reasons (fee, disputes, relationships, etc.).

In this study, a ranking of the importance level of the evaluation criteria, for the selection and change of the independent audit firm in an enterprise in Borsa İstanbul (BIST) 100 in Turkey, was conducted. Analytical Hierarchy Process (AHP), which is one of the multicriteria decision-making techniques, was used for ranking. In the hierarchy established for the selection of the independent audit firm, the main criteria of the “audit fee” and the “reputation and qualifications of the audit firm” have been established. According to the findings obtained as a result of binary comparisons, the first four ranks among sub-criteria are “provision of international service,” “quality of technical expertise of audit firm,” “industry expertise of audit firm,” and “suitability of fee offered by audit firm.”

For the change of audit firm, four main criteria “audit fee,” “disputes arising during the audit process,” “relations with the audit firm,” and “rotation” are taken into consideration. For sub-criteria, first four criteria were “rotation of independent audit firm,” “rotation of independent auditor,” “audit firm’s inability to adequately practice proactive audit approaches,” and “inadequate communication.”

This paper aims to examine whether the ability of early-stage ventures to obtain external funding and the amount of additional information provided to potential investors are affected by the level of assurance (audit, review or compilation) received from independent accountants on the ventures’ historical financial statements. The assurance level provided should differently impact potential investors’ willingness to invest in a new venture and need for additional information during due diligence evaluation of the organization and entrepreneur.

To examine the relative effects of the signal provided by these levels of assurance on investment decisions, a survey is administered to collect data regarding an investment-related decision scenario. The three levels of assurance in independent accountant’s reports (audit, review or compilation) is manipulated when eliciting participants’ responses.

Results indicate that respondents perceive the signal provided by compilation reports, review reports and audit reports as increasing in reliability and are more likely to invest in a venture providing reports with that increasing reliability. Audited financial statements are viewed as the most reliable and provide a positive signal to potential investors and lenders. Consequently, potential investors may require less additional information from entrepreneurs with audited financial statements when conducting due diligence investigations.

Subjects used (Master of Business Administration students, with an average work experience of over six years, including some with investing experience) may not be the best proxies for early-stage investors.

This is the first study to examine the relative effectiveness of signals provided by the independent accountant’s audit, review and compilation reports in assisting early-stage business ventures and entrepreneurs raising funds, and dealing with due diligence requests for additional information. Results indicate that engaging an auditor for independent assurance on financial statements can benefit entrepreneurs by increasing the likelihood of obtaining necessary funds and decreasing the amount of additional information needed by potential investors.

Examines the role of professional associations, governmental agencies, and international accounting and auditing bodies in promulgating standards to foster auditor independence domestically and abroad. Focuses specifically on the role played by the American Institute of Certified Public Accountants, the Institute of Internal Auditors (IIA), the Securities and Exchange Commission and the US Government Accounting Office. Also looks at other professional associations in banking, industry, and manufacturing sectors dealing with sensitive issues of auditors′ involvement in such matters as management advisory services, operating responsibilities, outsourcing, opinion shopping, auditor rotation, and other conflicts of interest which may impair auditor independence.

We examine whether the percentage of independent members sitting on the audit committee, in different institutional settings, impacts the market reaction (measured by the abnormal stock returns variance and the abnormal trading volume) to earnings announcements. For our sample composed of more than 7'600 earnings announcements made by European firms from 15 countries between 2006 and 2014, we find that the market reactions to earnings announcements are significantly larger when the audit committee is more independent in countries with weak institutional setting. Our results generally hold after controlling for numerous methodological issues. We conclude that more independent audit committees are substitutes for weak institutions to increase the credibility of earnings announcements. Our results should be of great interest for European regulators who recently introduced new requirements for public firms regarding audit committees’ independence.

The primary objective of this paper is to examine the association between the seven human‐resource features (spanning three major themes: qualifications and credentials; business and initial public offering (IPO) launch experience; and diversity) of independent audit committee members and the level of underpricing.

A sample of 410 Singapore IPOs listing on the stock exchange of Singapore from January 1, 1997 to December 31, 2006 was used.

Empirical results overall suggest no overwhelming association between the human‐resource features of IPO audit committees and underpricing. Rather, the findings suggest only some specific human‐resource features (e.g. presence of an independent audit committee member with accounting qualifications and credentials) are of significance. Others (e.g. gender diversity of independent audit committee members) have little or no association. Also, results do not suggest a major category of human‐resource features (i.e. qualifications and credentials, business and IPO launch experience, or diversity) is associated with underpricing. Time also does not appear to affect the results.

As human‐resource features tended to increase rather than lower an IPO's cost of capital, or had not influence at all, our findings generally do not support some policymakers' arguments for the introduction of mandated uniform audit committee structures. Rather, the results support flexibility to determine the properties of the audit committee.

This study is one of the first (particularly outside the USA) to investigate linkages between audit committee human‐resource features and underpricing. Whilst acknowledging some caveats associated with this study, such as focusing on a single nation, this paper contributes relevant insights to the debate about audit committee effectiveness.

The purpose of this paper is to investigate the effect of audit committee independence, board ethnicity and family ownership on earnings management in Malaysia.

The effect of audit committee independence, board ethnicity and family ownership on corporate governance is investigated via 1,206 firm-year observations between the fiscal years of 2004 and 2009 of Bursa Malaysia listed firms. Panel data regression analysis is used to analyze the relationship.

The findings of this study fail to associate the role of audit committee independence as proposed under RMCCG (2007) in curtailing earnings management activities, thus supporting the findings on power distance scores that power granted to the top management may result in less effective independent directors. Nonetheless, in support of the alignment effect theory, family ownership is found to reduce earnings management activities. The findings show that corporate governance is more effective in developing country family firms due to their long history of family reputation and the importance of institutional culture factors.

This study focuses on board ethnicity, family ownership and its influence on earnings management.

This study offers insights into the importance of family institutional structures on corporate governance reforms in Malaysia as Malaysian family firms are mostly traditional firms that have built their reputation and strength in the industry for many generations.

In South Africa, King III requires companies to have their corporate social responsibility (CSR) disclosures independently assured. Within this context, the purpose of this paper is to examine internal audit’s CSR assurance role.

With reference to the International Professional Practices Framework of the Institute of Internal Auditors, the first phase of the study conceptually considers whether internal audit does qualify as an independent CSR assurance provider. Using a content analysis of integrated reports, the second phase examines the extent to which internal audit’s CSR assurance role has been disclosed. The final phase relies on survey responses to understand the emerging trends observed in the second phase.

The study finds that although internal audit does provide independent CSR assurance, this assurance is primarily intended for internal stakeholders to assist in improving the quality of CSR reporting practices. With one notable exception across the study period, the results suggest that any benefits accruing to external stakeholders were not deliberate, but merely incidental. The paper concludes by arguing that although internal audit will continue to incorporate material CSR issues into its mandatory risk-based auditing approach, the results will not necessarily be publicly available. The extent of reliance that external stakeholders can place on company CSR disclosures are therefore not directly influenced by internal audit’s involvement in CSR-related matters. However, by adopting a proactive CSR role, internal audit can assist reporting companies improve their CSR reporting practices.

Although CSR assurance has been extensively researched, this is one of the first studies to specifically consider the CSR assurance role of the internal audit activity. Despite its South African orientation, given the emerging nature of the CSR assurance phenomenon, the study findings have global implications.

The Sarbanes‐Oxley Act (SOX) mandated a variety of corporate governance mechanisms to improve the transparency of financial reporting quality. This paper's aim is to investigate whether SOX's recently mandated disclosure of corporate governance structures affects the market's perception of earnings informativeness and firms' earnings management.

Since the first compliant disclosure of the Act would be found in firms' 2002‐2003 financial reports, the authors retrieve the post‐SOX data (pre‐SOX data) from the 2002 to 2003 (2001‐2002) period. Further, the study adopts Anderson et al.'s model to test the relations between earnings informativeness, audit committee independence, and other corporate governance variables. A similar mode is used by Chang and Sun in their study of cross‐listed foreign firms. To measure the discretionary accruals, the authors adopt Kothari et al.'s model and use the two‐digit SIC code in the cross‐sectional regression.

It is found that the market valuation of earnings surprises is significantly higher for firms which disclose stronger corporate governance functions. It is also found that the effectiveness of corporate governance in monitoring earnings management is improved after the mandated disclosure.

The empirical evidence shows that the quality of accounting earnings is increased after the SOX's mandated disclosure, which strengthens the link between financial reporting and corporate governance functions.

This study aims to examine the ability of independent directors to discipline related-party transactions (RPTs) among listed companies in Malaysia. Firms typically appoint independent directors individually, not as a group. However, board members are commonly viewed collectively as a group, and evidence of the abilities of individual directors is scarce.

The attributes of individual independent directors include accounting literacy, length of service, audit committee membership and active participation in board and audit committee meetings. The unit of analysis is the individual independent director. The final sample consists of 1,552 observations in 2017, and RPTs are categorized as either efficient or conflicting.

The study finds that the tenure of individual independent directors and active participation in board meetings affect the firm’s engagement in RPTs. However, the financial literacy, audit committee membership and attendance of independent directors at audit committee meetings do not affect the firm’s engagement in RPTs, either efficient or conflicting. Overall, this result offers limited support for the upper-echelon theory concerning the attributes of individual independent directors and RPTs.

This study uses cross-sectional observations for 2017, which predates the COVID-19 pandemic. Thus, this study ignores the impact of restrictions in community mobility during the pandemic on the independent director’s ability to monitor the corporation. This circumstance may have implications for practice and merit further research.

The findings provide information for board nominating committees, regulators and policymakers that the capability of individual independent directors to fulfill their responsibilities is limited. The firm’s nominating committee must be very selective in nominating and appointing independent directors with appropriate competencies. Investors should choose companies that have reappointed the same independent directors for an extended period, as they may benefit from the experience in protecting investors’ interests.

This paper contributes novel evidence to upper-echelon theory literature on the association between independent directors and RPT types from the perspective of individual independent directors.

This chapter examines corporate governance–related financial reporting issues in the context of globalization. Over the past few decades, the process of globalization has substantially altered the fields of corporate governance and accounting. More specifically, Anglo-American models of corporate governance and financial reporting have received increasing momentum in emerging economies, including China. However, a review of relevant studies suggests that there is limited research examining the implementation of Anglo-American concepts in various countries regardless of their growing acceptance. This monograph extends the existing literature by comprehensively investigating the adoption of internationally acceptable principles and standards in China, the largest transitional economy that has different institutional context from Anglo-American countries. In addition, the review has a number of implications for developing the theoretical framework, and determining the research methodology for the monograph.