The Effectiveness of Corporate Governance and External Audit on Constraining Earnings Management Practice in the UK. PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download The Effectiveness of Corporate Governance and External Audit on Constraining Earnings Management Practice in the UK. PDF full book. Access full book title The Effectiveness of Corporate Governance and External Audit on Constraining Earnings Management Practice in the UK. by Murya Habbash. Download full books in PDF and EPUB format.
Author: Murya Habbash
Publisher:
ISBN:
Category : Earnings management
Languages : en
Pages :
Get Book Here
Book Description
Agency theory predicts that corporate governance and external audit enhance the convergence of interests between shareholders and managers. The primary objective of this thesis is to investigate the effect of corporate governance and external audit on constraining earnings management practice in the UK. In this thesis, earnings management is measured using the magnitude of discretionary accruals as estimated by the performance matched discretionary accruals (Kothari et al., 2005) model. A review of the corporate governance literature reveals sixteen attributes that can impact on shareholders? perception of earnings quality due to their role in enhancing financial reporting integrity. The corporate governance attributes are organized in four categories: 1) Board Composition; 2) Audit Committee Effectiveness; 3) Non-Executive Directors? (NEDs) Commitment; and 4) Ownership Structures. The external audit factors include auditor independence and audit quality. Two models are constructed and a set of hypotheses are stated. These models are tested using a sample consisting of the top 350 companies listed on the London Stock Exchange. Firms in the financial, mining and regulated industries are excluded due to different accrual choices and valuation processes. The study covers the period of four financial years (2003, 2004, 2005 and 2006). Nineteen hypotheses are derived from both models. These hypotheses are tested using univariate and multivariate techniques to determine if corporate governance attributes and external auditor factors significantly constrain discretionary accruals. The results reveal that board size and independence, audit committee independence and expertise, nomination committee independence, chairman independence, the level of NED fees and an independent and specialised external auditor are negatively associated with earnings management at significant levels. The primary contribution to knowledge of this research is its extension of the literature on the role of corporate governance and the external auditor in constraining earnings management practice in the UK. This study?s results are useable by stock market participants in their evaluation of corporate governance and the role of the external auditor in enhancing earnings quality. The findings will also assist regulators in defining effective corporate governance attributes and assessing the disclosure of corporate governance practices.
Author: Murya Habbash
Publisher:
ISBN:
Category : Earnings management
Languages : en
Pages :
Get Book Here
Book Description
Agency theory predicts that corporate governance and external audit enhance the convergence of interests between shareholders and managers. The primary objective of this thesis is to investigate the effect of corporate governance and external audit on constraining earnings management practice in the UK. In this thesis, earnings management is measured using the magnitude of discretionary accruals as estimated by the performance matched discretionary accruals (Kothari et al., 2005) model. A review of the corporate governance literature reveals sixteen attributes that can impact on shareholders? perception of earnings quality due to their role in enhancing financial reporting integrity. The corporate governance attributes are organized in four categories: 1) Board Composition; 2) Audit Committee Effectiveness; 3) Non-Executive Directors? (NEDs) Commitment; and 4) Ownership Structures. The external audit factors include auditor independence and audit quality. Two models are constructed and a set of hypotheses are stated. These models are tested using a sample consisting of the top 350 companies listed on the London Stock Exchange. Firms in the financial, mining and regulated industries are excluded due to different accrual choices and valuation processes. The study covers the period of four financial years (2003, 2004, 2005 and 2006). Nineteen hypotheses are derived from both models. These hypotheses are tested using univariate and multivariate techniques to determine if corporate governance attributes and external auditor factors significantly constrain discretionary accruals. The results reveal that board size and independence, audit committee independence and expertise, nomination committee independence, chairman independence, the level of NED fees and an independent and specialised external auditor are negatively associated with earnings management at significant levels. The primary contribution to knowledge of this research is its extension of the literature on the role of corporate governance and the external auditor in constraining earnings management practice in the UK. This study?s results are useable by stock market participants in their evaluation of corporate governance and the role of the external auditor in enhancing earnings quality. The findings will also assist regulators in defining effective corporate governance attributes and assessing the disclosure of corporate governance practices.
Author: Sonda Marrakchi Chtourou
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
Get Book Here
Book Description
This study investigates whether a firm's corporate governance practices have an effect on the quality of its publicly released financial information. In particular, we examine the relationship between audit committee and board of directors characteristics and the extent of corporate earnings management as measured by the level of positive and negative discretionary accruals. Using two groups of US firms, one with relatively high and one with relatively low levels of discretionary accruals in the year 1996, we find that earnings management is significantly associated with some of the governance practices by audit committees and boards of directors. For audit committees, income increasing earnings management is negatively associated with a larger proportion of outside members who are not managers in other firms, a clear mandate for overseeing both the financial statements and the external audit, and a committee composed only of independent directors that meets more than twice a year. We also find that short-term stocks options held by non-executive committee members are associated with income increasing earnings management. Income decreasing earnings management is negatively associated with the presence of at least a member with financial expertise and a clear mandate for overseeing both the financial statements and the external audit.For the board of directors, we find less income increasing earnings management in firms whose outside board members have experience as board members with the firm and with other firms. We also find that larger board, the importance of the ownership stakes in the firm held by non-executive directors, and experience as board members seems to reduce income decreasing earnings management.Our results provide evidence that effective boards and audit committees constrain earnings management activities. These findings have implications for regulators, such as the Securities and Exchange Commission (SEC), as they attempt to supervise firms whose financial reporting is in the gray area between legitimacy and outright fraud and where earnings statements reflect the desires of management rather than the underlying financial performance of the company, as pointed out by the Blue Ribbon Committee (1999).
Author: Ademola Akinteye
Publisher: GRIN Verlag
ISBN: 334607871X
Category : Business & Economics
Languages : en
Pages : 862
Get Book Here
Book Description
Doctoral Thesis / Dissertation from the year 2015 in the subject Business economics - Investment and Finance, grade: Great Distinction, UGSM-Monarch Business School Switzerland (Accounting and Finance), course: Doctor of Philosophy in Finance, language: English, abstract: The dissertation examined Earnings Management and Corporate Governance Governance Practices of the firms that are listed on the floor of the Nigerian Stock Exchange. The researcher investigated the published financial statements of all the listed companies across all the sectors of the exchange using empirical quantitative research methods. Al the variables of earnings management were extracted from the published annual financial statements and Directors Annual Reports through Content Analysis. The paper further explored all the variables of corporate governance as published by the Directors in the Annual Reports in the Financial Statements and through a face to face recorded interviews of the members of the Board of Directors, the members of the Audit Committees and the Heads of Internal Audit Functions in the Listed Public Companies. The study documented that companies that are listed on the Nigerian Stock Exchange are involved in both the upward and downward earnings management practices. This findings cut across all the Sectors and categorization of the companies on the Nigerian Stock Exchange. The research thus recommended the need for better oversight by the Board of Directors, the Audit Committee and the Market Regulators mainly the Security and Exchange Commission and the Nigerian Stock Exchange. The findings of the Research on Corporate Governance is mixed. In certain sectors, evidence of strong corporate governance are documented as reflected in the quality of Board Members, the Quality of the deliberations at the Board meetings, the independence of the Board, the independence of the Audit Committee and the independence and effectiveness of the Head of the Internal Audit function measured by the reporting line of the holder of this role. In some sectors, the ingredients of strong corporate governance were missing thus suggesting a need for a more stricter regime of corporate governance to be implemented in these corporations.
Author: Oliver Marnet
Publisher: Routledge
ISBN: 1134073674
Category : Business & Economics
Languages : en
Pages : 387
Get Book Here
Book Description
Corporate scandals due to bad accounting happen far too frequently for a system of corporate governance to be deemed effective. This book tells why the safeguards designed to prevent bad accounting so often fail. By studying why the auditors and members of a board of directors regularly fail to deliver the truth about a company‘s financ
Author: Ademola Akinteye
Publisher:
ISBN: 9783346078728
Category :
Languages : en
Pages : 868
Get Book Here
Book Description
Doctoral Thesis / Dissertation from the year 2015 in the subject Business economics - Investment and Finance, grade: Great Distinction, UGSM-Monarch Business School Switzerland (Accounting and Finance), course: Doctor of Philosophy in Finance, language: English, abstract: The dissertation examined Earnings Management and Corporate Governance Governance Practices of the firms that are listed on the floor of the Nigerian Stock Exchange. The researcher investigated the published financial statements of all the listed companies across all the sectors of the exchange using empirical quantitative research methods. Al the variables of earnings management were extracted from the published annual financial statements and Directors Annual Reports through Content Analysis. The paper further explored all the variables of corporate governance as published by the Directors in the Annual Reports in the Financial Statements and through a face to face recorded interviews of the members of the Board of Directors, the members of the Audit Committees and the Heads of Internal Audit Functions in the Listed Public Companies. The study documented that companies that are listed on the Nigerian Stock Exchange are involved in both the upward and downward earnings management practices. This findings cut across all the Sectors and categorization of the companies on the Nigerian Stock Exchange. The research thus recommended the need for better oversight by the Board of Directors, the Audit Committee and the Market Regulators mainly the Security and Exchange Commission and the Nigerian Stock Exchange. The findings of the Research on Corporate Governance is mixed. In certain sectors, evidence of strong corporate governance are documented as reflected in the quality of Board Members, the Quality of the deliberations at the Board meetings, the independence of the Board, the independence of the Audit Committee and the independence and effectiveness of the Head of the Internal Audit function measur
Author: Laura F. Spira
Publisher: Springer Science & Business Media
ISBN: 030647655X
Category : Business & Economics
Languages : en
Pages : 191
Get Book Here
Book Description
Why do we need to understand audit committees? The Cadbury Committee recommended that UK companies should adopt them in response to financial scandals that have stemmed from dubious financial reporting practices. In other countries, similar commissions have made similar recommendations and audit committees are now a common institution. However, many practitioners doubt whether an audit committee really does much to ensure the integrity of a firm's financial statements because, as outsiders, members don't know enough to dig deeply beneath the numbers. The Audit Committee: Performing Corporate Governance argues that such criticism overlooks the ceremonial function of these committees. The audit committee is an arena where members can form and strengthen shifting and fragmentary networks with each other and with the external auditors. Within these networks, both consensus and independence are demonstrated, generating comfort, which legitimises the company and maintains its access to external sources of capital. The audit committee is a key part of the corporate governance structure within an organisation. Many in the UK have been patched together to meet regulatory requirements and their operation is poorly understood because few people other than their members have access to their deliberations. In this account of the world of audit committees the practitioner will find the ethnographical perspectives on ceremonial performance, consensus, independence, and comfort both familiar and different. It's like looking at a photograph of something commonplace from an unusual angle or through a strange-shaped lens.
Author: Dr. Indara Selline
Publisher: IPR Journals and Book Publishers
ISBN: 9914752705
Category : Business & Economics
Languages : en
Pages : 175
Get Book Here
Book Description
TOPICS IN THE BOOK The Moderating Role of Technology on the Link between Strategic Training and Performance of State Ministries: Perspectives from Kenya Influence of Strategic Management Practices on the Performance of Uganda Police Force Technological Strategies and Performance of the Judicial Sector in Kenya: A Case of Nairobi City County Strategic Management Practices on Performance of Family-Owned Firms in the Manufacturing Sector in Kenya Challenges Hampering Adoption of Different Housing Models to Access Housing by Households in Nairobi County
Author: Joseph V. Carcello
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
Get Book Here
Book Description
A prime objective of the Sarbanes-Oxley Act and recent changes to stock exchange listing standards is to improve the quality of financial reporting. We examine the associations between audit committee financial expertise and alternate corporate governance mechanisms and earnings management. We find that both accounting and certain types of non-accounting financial expertise reduce earnings management for firms with weak alternate corporate governance mechanisms, but that independent audit committee members with financial expertise are most effective in mitigating earnings management. Importantly we find that alternate corporate governance mechanisms are an effective substitute for audit committee financial expertise in constraining earnings management. Finally, we find either no association or a positive association between financial expertise and real earnings management. Our results suggest that alternate governance approaches are equally effective in improving the quality of financial reporting, and that firms should have the flexibility to design the particular set of governance mechanisms that best fit their unique situations.
Author: Chol Gabriel Majer Deng PhD-Candidate (MBA, PGDBA, BBA B&F, DIPLOMA, PPM)
Publisher: IPR Journals and Book Publishers
ISBN: 9914752675
Category : Education
Languages : en
Pages : 349
Get Book Here
Book Description
SUMMARY This book is a comprehensive guide aimed at novice researchers seeking to understand and apply various data collection techniques effectively. The book breaks down complex research methodologies into easy-to-understand concepts, making it accessible to readers with limited prior knowledge in research methods. Through clear explanations and practical examples, it covers a range of data collection methods, including surveys, interviews, observations and document analysis. Additionally, it emphasizes the importance of ethical considerations and provides practical tips for ensuring data quality and reliability. Whether conducting academic research or practical projects, this book serves as a valuable resource for individuals looking to enhance their research skills and achieve meaningful results.
Author: Great Britain: Parliament: House of Commons: Public Accounts Commission
Publisher: The Stationery Office
ISBN: 9780215513625
Category : Business & Economics
Languages : en
Pages : 28
Get Book Here
Book Description
This report presents John Tiner's "Review of the National Audit Office's corporate governance". The head of the National Audit Office, the Comptroller and Auditor General (C&AG), is an Officer of the House of Commons appointed by the Queen, and is completely independent of Government and enjoys complete discretion over the discharge of his functions. The current C&AG has put in place a number of governance processes, but in their effectiveness these fall short of what is currently best practice. The NAO must remain independent, but work within systems of governance that are consistent with best practice, and follow relevant auditing and professional standards. The main proposals are: (1) the NAO should be formed as a body corporate with a governing board comprising a majority of independent non executive directors. Its main functions should be to set the strategy of the Office, support and oversee the work of the C&AG, ensure the Office conducts its business in an economic, efficient and effective way and satisfy itself that the systems of governance and internal controls operate effectively and to the highest standards. (2) The Chief Executive (the C&AG) should have complete personal discretion as to the audit judgements he reaches and the presentation of those judgements to the Public Accounts Committee and other committees of Parliament as may be necessary. (3) Both the Chairman and Chief Executive of the NAO Board would be appointed by the Queen on a motion from the House of Commons. The Chairman and the other non-executives should be appointed for a term of 3 years renewable once. The Chief Executive should be appointed for a fixed term of 8 years which cannot be renewed.
