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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.

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

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.

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.

This study aims to examine the relationship between the presence of a Malay director on the board and financial statement fraud in Malaysia. Further, the authors investigate whether financial statement fraud firms improve their governance mechanisms compared to non-fraud firms subsequent to the fraud year.

The authors use hand-collected data comprising 76 financial statement fraud and 76 non-fraud firms over a period of eight years from 2001 to 2008.

Using a univariate and logistic regression model, the results demonstrate a significant positive relationship between the proportion of Malay directors on the board and the financial statement fraud. The authors also find that fraud firms significantly increase the proportion of independent directors on their boards, increase the frequency of board and audit committee meetings and reduce duality subsequent to the detection of financial statement fraud compared to the non-fraud firms.

The findings of the study are useful to policy-makers, regulators, firms and investors.

We examine whether the fraud firms are engaged in real earnings management and accrual earnings management prior to the fraud year in the Malaysian context.

Our sample comprises of 65 financial statement fraud and 65 non-fraud firms over a period of eight years from 2001 to 2008.

Using the abnormal cash flow from operations (CFO) and abnormal production costs as the proxies for real earnings management, we find that financial statement fraud firms engage in manipulating production costs during preceding two years of the fraud event. However, our results show that financial fraud firms engage in manipulating CFO prior to the fraud event. Additionally, we find that financial statement fraud firms prefer to manipulate earnings using accruals relative to real earnings prior to the fraud year.

Our results demonstrate that real earnings management is more aggressive in financial statement fraud firms compared to the non-fraud firms in the four years prior to fraud.

The purpose of this paper is to examine the determinants of accounting policy choices under International Accounting Standards (IASs) of listed firms in South Asia.

We selected three IASs-based accounting policy choices from 369 listed companies in India, Pakistan and Bangladesh for the financial year 2007-2008.

Our results show that firm size, investment opportunity set, leverage and ownership by the general public are significant determinants of accounting policy choice in South Asian countries. However, we do not find a significant relationship between firms’ accounting policy choices and profitability, assets-in-place and taxes.

Our results suggest that as some flexibility exists in IASB’s accounting standards, this may allow managers to use income-increasing/decreasing methods. There is scope for regulators and standards setters to reduce the alternative methods which are likely improve firms’ reporting quality.

Our study contributes to the understanding as to what determines managers’ choice of a particular accounting method allowed in IAS.

This paper aims to examine the effects of global financial crisis (GFC) on chief executive officers’ (CEO) compensation and earnings management relationship. Specifically, the authors examine whether the recent financial crisis had moderated the relationship between CEO bonus and discretionary accruals.

The authors use panel data for 1,800 firm-year observations (over a period of six years from 2005 to 2010) and use univariate and multivariate tests to test their hypothesis. The authors divide the period into pre-crisis, during-crisis and post-crisis periods to examine how the different financial crisis periods affect the relationship between CEO compensation and earnings management. Various alternative tests including endogeneity test suggest that the results are robust.

The authors’ multivariate results indicate that the relationship between CEO’ compensation and earnings management changes because of the GFC.

The findings, therefore, justify more monitoring and scrutiny to limit the existence of opportunistic managerial behaviour and for the appropriate designing of CEO compensation packages during abnormal economic circumstances.

So far as the authors’ knowledge goes, this is the first study which examines the relationship between CEO compensation and earnings management during GFC.

The study examines whether corporate governance moderates the relationship between CEO compensation and earnings management.

The study uses 1,800 firm-year observations from 2005 to 2010 and employ multiple regression analyses and other sensitivity tests.

The study finds a positive relationship between CEO compensation and earnings management. The study’s results also suggest that CEO bonus compensation increases in relation to earnings management and therefore the study infers that managers may become involved in earnings management to increase their compensation. However, the study finds that the relationship is moderated by a strong corporate governance system which reduces the impact of earnings management on CEO compensation.

The study is conducted in a specific context, and therefore it may be subject to a set of limitations. The study emphasises exclusively on whether executives manage earnings to increase their compensation. The study does not consider the issue of several other and potentially contradictory motivations here.

The study’s findings highlight potential implications and offer useful propositions for stakeholders, particularly accounting and corporate governance regulators, to consider. The findings offer a basis for the accounting professions to further discuss and improve accounting standards to provide adequate regulations and monitoring to decrease managerial opportunistic behaviours in earnings manipulations. The findings also emphasise the need for appropriately designed CEO compensation packages in such a manner that improves the manager–shareholder alignment and reduces the information asymmetry problem. The results signify that corporate governance plays a vital role in mitigating the relationship between CEO compensation and earnings management.

This study adds to the existing literature by documenting empirical support on the link between earnings management and CEO compensation against a backdrop of high demand for strong corporate governance practices.

This paper aims to examine whether the level of harmonization of accounting measurement practices in three South Asian countries – Bangladesh, India and Pakistan – has improved since 1998 as a result of the changes, in recent years, globally in accounting measurement practices due to the substantial efforts of the International Accounting Standards Board (IASB). South Asian countries have taken a number of steps and made changes in accounting regulations to support the IASB’s harmonization programme.

In all, 370 non-financial companies for the financial years 1997-1998 and 2007-2008 were used, and consistent with Ali et al. (2006), Van der Tas’s (1988) I index and Archer et al.’s (1995) modified C index were used to measure the extent of harmonization.

It was found that the level of measurement harmonization has significantly improved over the years in selected South Asian countries.

The results suggest that the harmonization of accounting will most likely ensure a greater level of transparency and uniformity in corporate reporting practices (measurement) in South Asian countries and throughout the world as promoted by the IASB.

The purpose of this study is to examine whether the level of voluntary disclosure affects firm value in the Chinese capital market. It also investigates whether voluntary disclosure and the values of Chinese firms are influenced by the global financial crisis (GFC).

The study used a sample of 714 firm‐year annual reports of listed companies on the Shanghai and Shenzhen Stock Exchanges over a period of five years from 2005 to 2009 and adopt a two‐stage OLS (2SLS) procedure.

It is found that the extent of voluntary disclosure has improved in China during the period studied. The multiple regression results indicate that more voluntary disclosure does not create value for Chinese firms. It is also observed that multinational ownership, non‐executive directors, and audit committee presence are positively and significantly associated with voluntary disclosure. Furthermore, the study reports that state and individual ownerships are negatively associated with firm value while multinational ownership and liquidity have a positive significant association with firm value. During the financial crisis, voluntary disclosure continues to increase, however, firm value has decreased.

Using data from the Chinese market, the study fills a research gap by examining the value relevance of voluntary disclosure and tests whether the Global Financial Crisis has influenced voluntary disclosure levels and Chinese firms' values.

The purpose of this paper is to examine the determinants of analysts' operating cash flow forecasts of Australian listed firms and whether or not such forecasts improve the usefulness of earnings and predictive ability of current cash flows.

The authors used a large sample of firms for which both cash flows and earnings forecasts were available over a period between 1993 and 2003, and employed both univariate and logistic regression analyses.

It was found that analysts forecast both operating cash flows and earnings when the firms are more complex in operations and when the size of the firm is relatively small. Further, it was found that cash flow forecasts improve the usefulness of earnings and predictive ability of current cash flows.

This study contributes to current understanding of analysts' forecast behaviour regarding dissemination of operating cash flow information and usefulness of cash flow forecasts.

The purpose of this paper is to examine the efficacy of the current legislative provisions that protect auditor independence in Australia. The collapses of several high-profile companies (Enron and WorldCom in the USA, HIH insurance and OneTel in Australia) in the early 2000s has raised questions about audit quality and independence. In response, regulators have introduced new regulations and guidance to improve audit quality. In Australia, the Corporations Act 2001 (2001) was amended via the Corporate Law Economic Reform Program Act 2004. This study poses the question: do non-audit service fees influence the level of accounting conservatism?

The sample used in this analysis consists of all available Australian listed companies from the years 2006 till 2010.

Using multiple measures of accounting conservatism and the auditor-client economic bond, our results suggest that the level of the economic bond between the auditor and the client does not significantly influence the level of accounting conservatism.

Our results demonstrate that the combination of intrinsic market mechanisms and regulation in Australia sufficiently protect auditor independence.