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Author: Hidaya Mustafa Ali Al Lawati
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Hidaya Mustafa Ali Al Lawati
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Andrew J. Felo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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In this paper, we empirically examine the relationship between two audit committee characteristics - the composition (expertise and independence) and size of the audit committee - and the quality of financial reporting. We show that after controlling for firm size, board composition, a measure of management's commitment to transparency (the existence of an ethics program) and institutional ownership, the percentage of audit committee members having expertise in accounting or financial management is positively related to financial reporting quality. We also find some evidence of a positive relationship between the size of the audit committee and financial reporting quality. However, audit committee independence is not related to financial reporting quality. We also verify that our results are robust across different measures of financial reporting quality. Our results suggest that mandating greater expertise on audit committees rather than simply requiring one expert on the audit committee may be beneficial to investors. In addition, our results also provide weak support for the recommendation of the Blue Ribbon Committee that firms devote significant directorial resources to the audit committee. Given the prior evidence of a negative relationship between financial reporting quality and cost of capital, firms could improve their reporting quality by appropriately structuring their audit committees, thus reducing their cost of capital.
Author: Frank M. Burke
Publisher: CCH
ISBN: 9780808091646
Category : Business & Economics
Languages : en
Pages : 468
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Author: Chaudhry Ghafran
Publisher:
ISBN:
Category :
Languages : en
Pages :
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This thesis examines the impact of audit committee characteristics on financial reporting quality in the context of a large sample of UK companies over the period 2007-2010. The notion of financial reporting quality is assessed by looking at the audit quality and earnings quality of the firms. This study utilises the audit fee and non-audit fee ratio as its proxies for audit quality and accruals based earnings management models as its proxies for earnings quality. The findings from the multivariate analysis show that audit committee meetings and financial expertise exert a significant positive impact on audit fees. Investigating expertise further, this study finds no support for the notion that accounting expertise influences audit fees, however a significant positive influence on audit fees is recorded for the non-accounting financial expertise. However, the holding of additional directorships has a significant negative impact on audit fees. This study also finds that audit committee members' financial expertise has a negative and significant impact on non-audit fee ratio suggesting a strong support of members with financial expertise on issues relating to auditor independence. The study also documents that audit committee members serving longer on the boards do not prefer to purchase high amount of non-audit services from the incumbent auditor. This study also records a significant positive impact of the holding of additional directorships on the provision of non-audit fee ratio, thus signifying a profound support for the busyness hypothesis which argues that overstretched directors are not very good monitors of financial reporting quality. Furthermore, this study finds broadly consistent evidence that audit committees meeting three or more times per year and fully independent audit committees exert a significant positive impact on the quality of reported earnings. This study also finds some evidence (depending on the earnings model used) that the level of ownership of audit committee members also exerts a positive impact on the quality of reported earnings, highlighting the fact that audit committee members with an equity stake in their companies are considered more effective in their oversight of the financial reporting process. On the other hand, this study finds evidence that the busyness of audit committee members (busyness defined in terms of the holding of board seats in other companies) has a significant negative impact on the quality of reported earnings. The composite variables (i.e. ACE1, ACE2, ACE3 and ACE4) representing those companies that satisfy all aspects of current best practice in terms of audit committee composition and operation, has a positive impact on the quality of reported earnings. This study covers the period 2007 to 2010 and therefore offers a contemporary analysis of the influence of audit committee characteristics on financial reporting quality. The study is very comprehensive in its scope not only in the selection of audit committee characteristics and methods employed to quantify these characteristics, but also in the use of various proxies developed to capture the true essence of financial reporting quality. The choice of multiple measurement methods both for the dependent and independent variables facilitates a much richer investigation into the relationship between governance and financial reporting quality variables. Therefore this study makes a major contribution to our understanding of the association between the various audit committee characteristics and financial reporting quality in the wake of recently introduced regulatory recommendations. These findings will also have policy implications as regulators around the world continue to define and refine the desired characteristics and behaviour of audit committees. Therefore, the findings of this study will ensure future policy changes regarding audit committees are adequately informed.
Author: David W. Wright
Publisher:
ISBN:
Category : Corporate governance
Languages : en
Pages : 46
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Author: Thomas C. Omer
Publisher:
ISBN:
Category :
Languages : en
Pages : 63
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This study examines the effect of audit committee connectedness through director networks on financial reporting quality, specifically the misstatement of annual financial statements. Using network analysis, we examine multiple dimensions of connectedness and find that, after controlling for operating performance and corporate governance characteristics, firms with well-connected audit committees are less likely to misstate annual financial statements. In addition, our study demonstrates that audit committee connectedness through director networks moderates the negative effect of board interlocks to misstating firms on financial reporting quality. We conduct several tests to address identification concerns and find similar results. Our findings suggest that firms with better-connected audit committees are less likely to adopt reporting practices that reduce financial reporting quality.
Author: Zhuoan Feng
Publisher:
ISBN:
Category : Audit committees
Languages : en
Pages : 99
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Financial reporting comparability is one of the key qualitative characteristics that allows accounting information users to identify and understand similarities and differences in the financial performance of two firms. While prior studies manily focus on the role of accounting standards in the production of comparability, the role of economic agents and institutional incentives has been largely overlooked. To fill this gap, this study argues that a firm's audit committee, as an economic agent within the firm, is important in shaping financial reporting comparability because the audit committee oversees the financial reporting and disclosure process, and monitors the choice od accounting policies and principles.
Author: James M. Braswell
Publisher:
ISBN:
Category : Audit committees
Languages : en
Pages :
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Regulators and financial reporting institutions have recently increased their focus on audit committee composition, indicating an acknowledgement of the potential importance of audit committee monitoring efforts on financial reporting quality. I extend prior corporate governance research by exploring whether the duration of service on a specific audit committee (i.e., audit committee tenure) affects earnings quality, future financial performance and cost of capital. Using a sample of 2,355 firm years for fiscal years 1998-2003, I test the potential association between audit committee tenure and GAAP-based earnings quality proxies and find some evidence that audit committee tenure improves earnings quality by limiting the degree to which management relies on accruals to determine income. I also test whether audit committee tenure effectively reduces real earnings management proxies since such techniques reflect routine business decisions that often fall outside of GAAP's jurisdiction. I find that audit committee tenure is associated with the use of abnormally low discretionary expenses, suggesting that current-period earnings are artificially inflated when audit committee tenure is relatively longer. The next stage of my study examines the effect of audit committee tenure on firm performance. Audit committees can influence firm performance by two avenues. First, committee effectiveness can influence the quality of reported earnings, which could reduce the cost of capital and improve firm performance by making positive NPV projects more feasible. The audit committee also oversees risk management activities and internal reporting efforts that are ultimately used by the board of directors to monitor and ratify management's strategic decisions. The results of this analysis provide evidence consistent with the entrenchment hypotheses since audit committee tenure appears to have a negative effect on future firm performance. I conclude the study by analyzing the potential association between audit committee tenure and cost of capital. After employing both cost of equity and cost of debt proxies as dependent variables, I find no significant associations with audit committee tenure.
Author: Louis Braiotta, Jr.
Publisher: John Wiley & Sons
ISBN: 0470616075
Category : Business & Economics
Languages : en
Pages : 415
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The Audit Committee Handbook, Fifth Edition The Audit Committee Handbook, Fifth Edition guides you to: Understand the role and responsibilities of the audit committee with a general update and reality check on auditing cycle activities Identify the developments that impact audit committee practices and the most current techniques and strategies for committee meetings Develop a repertoire of effective strategies to help the board of directors discharge its fiduciary responsibility to shareholders Prepare a periodic assessment of professional development activities and an informed review of both audit processes and financial reporting processes A must-have for all audit committee members, board directors, corporate secretaries, CEOs, CFOs, and auditors involved in the accounting practices of their firms, The Audit Committee Handbook, Fifth Edition is the most authoritative work on audit committees in the marketplace.
Author: Abdulkadir Madawaki
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 42
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