The impact of audit committee expertise on external auditors' disclosures of key audit matters

2021 ◽  
Author(s):  
Penny F. Zhang ◽  
Greg Shailer
Keyword(s):  
Audit Committee ◽  
External Auditors ◽  
The Impact

The Role Of Audit Committee Independence, Auditor Tenure, And Their Interaction On Managers’ Accounting Discretion

2011 ◽  
Vol 19 (4) ◽  
Author(s):  
Ho Young Lee
Keyword(s):  
Audit Committee ◽  
Audit Committees ◽  
Negatively Associated ◽  
External Auditors ◽  
Auditor Tenure ◽  
Incremental Effect ◽  
The Impact ◽  
Independent Audit

This study examines the role of audit committee independence and auditor tenure on client managers’ accounting discretion. It also examines the impact of the interaction between independent audit committees and long lasting auditors on managers’ accounting discretion. The results show that independent audit committees lower managers’ accounting discretion and auditor tenure is negatively associated with managers’ accounting discretion. In addition, this study provides evidence that the interaction between independent audit committees and external auditors having long-term relationships has an incremental effect on the managers’ reporting flexibility.

scholarly journals Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?

2021 ◽  
Author(s):  
Hidaya Al Lawati ◽  
Khaled Hussainey ◽  
Roza Sagitova
Keyword(s):  
Financial Institutions ◽  
Audit Committee ◽  
Securities Market ◽  
Disclosure Quality ◽  
External Auditors ◽  
Share Ownership ◽  
Multiple Directorships ◽  
Regulatory Bodies ◽  
The Impact

AbstractWe examine the impact of audit committee (AC) characteristics (e.g. AC foreign members, AC female members, AC members with multiple directorships, AC members with share ownership and AC with financial and supervisory expertise) on forward-looking disclosure (FLD) quality and quantity. Using a sample of Omani financial companies listed on Muscat Securities Market over a five-year period (2014–2018), we find that a number of AC characteristics (such as AC size, AC female members and AC with multiple directorships) improve FLD quality. We make no such observation for FLD quantity. The results suggest that the responsibility of AC extends to improving the quality of FLD. We provide an additional analysis on the impact of AC effectiveness (ACE) on FLD quality, which suggests that companies’ compliance with CG code is beneficial for disclosure quality. We also find that the impact of ACE on FLD quality is influenced by corporate performance, leverage and the quality of external auditors. Our findings carry implications for the regulatory bodies’ efforts in encouraging companies to improve disclosure quality by considering AC characteristics as well as appointing more effective AC directors.

scholarly journals An empirical study: characteristics of business entities and corporate governance on risk disclosure practices

2019 ◽  
Vol 20 ◽  
pp. 25-49
Author(s):  
Arfan Amrin
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Stock Exchange ◽  
Risk Disclosure ◽  
External Auditors ◽  
Risk Monitoring ◽  
Business Entities ◽  
Corporate Risk ◽  
The Impact

This paper investigates the association between the characteristics of business entities, corporate governance, and practices of risk disclosure. Notably, the objective of this paper is to examine the impact of the characteristics of business entities and corporate governance on risk disclosure in non-financial companies. The samples used in this study included 312 non-financial companies registered on the Indonesia Stock Exchange. The hypothesis testing in this paper using regression analysis. The results of this paper indicate that the size of the audit committee (SAC), the availability of risk monitoring or risk management committees (RMC) and the quality of external auditors (AUD) are significantly associated with corporate risk disclosure practices (CRD). These empirical results show that the presence of risk monitoring committee, the quality of external auditors, and the size of the audit committee are the main factors determining the extent of risk disclosure, especially for non-financial companies listed on the Indonesia Stock Exchange. This paper also shows that the age of business entities has a negative impact on corporate risk disclosure practices.

Overlapping membership on audit and compensation committees, equity holdings of overlapping members and audit outcomes

2018 ◽  
Vol 31 (4) ◽  
pp. 509-530 ◽  
Author(s):  
Ahsan Habib ◽  
Md. Borhan Uddin Bhuiyan
Keyword(s):  
Audit Committee ◽  
Good Governance ◽  
Audit Fees ◽  
Content Type ◽  
Compensation Committee ◽  
External Auditors ◽  
Audit Opinions ◽  
The Impact ◽  
Compensation Committees ◽  
Equity Holdings

PurposeThis paper aims to examine the question of whether external auditors incorporate equity holdings by overlapping audit committee members as a priced governance factor and tests whether this attribute, as a mechanism for ensuring good governance, affects the propensity for external auditors to issue modified audit opinions.Design/methodology/approachOverlapping membership in this context refers to the arrangement where at least one audit committee member also sits on the compensation committee. Both ordinarily least square and logistic regression are used to capture the impact of overlapping committee members and equity holding of those overlapping committee members.FindingsUsing archival data from Australian Stock Exchange listed companies, the authors find support for the beneficial effect of having overlapping audit committee members with equity holdings. The authors also find that auditor propensity to issue modified audit opinions is lower for firms with equity holdings by overlapping audit committee members.Practical implicationsThe finding has practical implication to the investors and regulators as overlapping audit committee members with equity holdings may provide especially effective oversight by monitoring opportunistic accounting policy choices for maximizing compensation pay. To the extent that this occurs, audit risk will decrease, requiring less audit effort and lower audit fees than would otherwise be necessary. Similarly, such oversight is likely to make financial reporting more credible and will reduce the possibility of receiving modified audit opinions by reporting organizations.Originality/valueBoth audit and compensation committees are equally important in modern organizations. While both of the committee have distinctive responsibilities, questions remain on the desirability of overlapping audit committee. Also, this is the first study to the authors’ knowledge that incorporates overlapping membership on audit and compensation committee as an important component of auditor risk perception which regards in pricing the audit fees.

Impact of Corporate Governance on the Cash Holding of the Firms: An Empirical Study of Indian Manufacturing Sector

GIS Business ◽  
2017 ◽  
Vol 12 (4) ◽  
pp. 47-52
Author(s):  
Karam Pal Narwal ◽  
Sonia Jindal
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Manufacturing Sector ◽  
Control Variable ◽  
Cash Holding ◽  
Executive Directors ◽  
Control Effect ◽  
Board Size ◽  
Indian Manufacturing Sector ◽  
The Impact

The paper empirically examines the impact of corporate governance on the cash holding of the firms. The components of corporate governance are measured by board size, board meeting, audit committee members, directors remuneration and non executive directors and the cash holding is measured with the log of average cash and size is taken as control variable for the control effect on the dependent variables. Moreover, correlation and panel regression model were employed to examine the relationship between the corporate governance and cash holding. Empirical data was collected from 96 firms over the period of 2004-05 to 2013-14. The results show that directors remuneration and the number of audit committee members positively influence the cash holding and the board size also positively influences the cash holding whereas, the non executive directors and the board meetings do not play any role in enhancing the cash holding.

Strategic Audit Inquiry: The Impact of Timing and the Promotion of Statutory Protections on Client Fraud Disclosures

2020 ◽  
Vol 34 (3) ◽  
pp. 153-167
Author(s):  
John R. Lauck ◽  
Stephen J. Perreault ◽  
Joseph R. Rakestraw ◽  
James S. Wainberg
Keyword(s):  
Best Practices ◽  
Audit Quality ◽  
Self Regulation ◽  
Data Availability ◽  
Audit Committees ◽  
External Auditors ◽  
Extant Literature ◽  
Psychological Theories ◽  
Inquiry Process ◽  
The Impact

SYNOPSIS Auditing standards require external auditors to inquire of client-employees regarding their knowledge of actual or suspected fraud (PCAOB 2010b; AICPA 2016). However, the extant literature provides little guidance on practical methods that auditors can employ to increase the likelihood of fraud disclosure and improve audit quality. Drawing upon best practices in the whistleblowing literature and psychological theories on self-regulation, we experimentally test the efficacy of two practical strategies that auditors can employ during the fraud inquiry process: actively promoting statutory whistleblower protections and strategically timing their fraud inquiries. Our results indicate that auditors are more likely to elicit client-employee fraud disclosures by actively promoting statutory whistleblower protections and strategically timing the fraud inquiry to take place in the afternoon, when client-employee self-regulation is more likely to be depleted. These two audit inquiry strategies should be of considerable interest to audit practitioners, audit committees, and those concerned with improving audit quality. Data Availability: From the authors by request.

The impact of audit reforms on objectivity during the performance of non-audit services

2014 ◽  
Vol 29 (3) ◽  
pp. 222-236 ◽  
Author(s):  
Richard G. Brody ◽  
Christine M. Haynes ◽  
Craig G. White
Keyword(s):  
Audit Quality ◽  
Content Type ◽  
Auditor Liability ◽  
Internal Auditors ◽  
External Auditors ◽  
Regulatory Perspective ◽  
External Auditor ◽  
The Impact ◽  
Practical Implications ◽  
Non Audit Services

Purpose – This research aims to explore whether recent audit reforms have improved auditor objectivity when performing non-audit services. Design/methodology/approach – In two separate experiments, the authors tested whether external and internal auditors' inventory obsolescence judgments are influenced by their client's (or company's) role as the buyer or seller in an acquisition setting. Findings – External auditors assessed the likelihood of inventory obsolescence objectively, regardless of their consulting role in the acquisition setting. Internal auditors assessed the likelihood of inventory obsolescence as higher when consulting for the buyer than when consulting for the seller, consistent with the supposition that the buyer would prefer to write-down inventory and negotiate a lower purchase price, whereas the seller would prefer the inventory not be written down. Practical implications – From a regulatory perspective, external auditors may be relying too much on the work of internal auditors if internal auditors' lack of objectivity as consultants extends to their assurance role. Originality/value – This paper extends prior research in the area of internal and external auditor objectivity and is the first paper to include both subject groups in the same experiment. It also addresses the current policy issues that may have a significant effect on audit quality and auditor liability.

scholarly journals Does Governance Affect Compliance with IFRS 7?

2021 ◽  
Vol 14 (6) ◽  
pp. 239
Author(s):  
Amal Yamani ◽  
Khaled Hussainey ◽  
Khaldoon Albitar
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Audit Committee ◽  
Banking Sector ◽  
Mandatory Disclosure ◽  
Disclosure Requirements ◽  
Corporate Governance Codes ◽  
Ifrs 7 ◽  
Enforcement Mechanisms ◽  
The Impact

Although there has been considerable research on the impact of corporate governance on corporate voluntary disclosure, empirical evidence on how governance affects compliance with mandatory disclosure requirements is limited. We contribute to governance and disclosure literature by examining the impact of corporate governance on compliance with IFRS 7 for the banking sector in Gulf Cooperation Council (GCC). We use a self-constructed disclosure index to measure compliance with IFRS 7. We use regression analyses to examine the impact of board characteristics, audit committee characteristics and ownership structure on compliance with IFRS 7. Using a sample of 335 bank-year observations for GCC listed banks over the period 2011–2017, we report evidence that corporate governance variables affect compliance with IFRS 7. However, the significance of these variables depends on the type of the regression model used. Our findings suggest that governance matters for mandatory disclosure requirements. So to improve the level of compliance, regulators, official authorities, and policymakers should intensify their efforts toward improving corporate governance codes, following up their implementation and enhancing the enforcement mechanisms.

The Impact of Financial Distress, Corporate Governance, and Auditor Switching on Audit Delay

2021 ◽  
Vol 6 (2) ◽  
pp. 108-117
Author(s):  
Sylvi Angelia ◽  
Rizal Mawardi
Keyword(s):  
Corporate Governance ◽  
Financial Services ◽  
Financial Distress ◽  
Audit Committee ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Multiple Linear Regression Analysis ◽  
Auditor Switching ◽  
Analysis Technique ◽  
The Impact

Objective – The purpose of this study is to examine the effect between financial distress, corporate governance, auditor switching and audit delay. This research sample using data on a manufacturing company on the Indonesia Stock Exchange. Methodology – The analysis technique used is multiple linear regression analysis technique. Findings– The research finding show that financial distress and the size of the audit committee have a significant effect on audit delay, while the concentration of ownership, managerial ownership, change of directors, and auditor switching has no significant effect on audit delay. Second finding explain that consideration for companies listed on the Indonesia Stock Exchange to pay attention to the timeliness of submitting financial reports and independent auditor reports so as not to get sanctions from the Financial Services Authority. Novelty – Our novelty research using the relationship of Financial Distress, Corporate Governance and Auditor Switching on new research model to Audit Delay. Type of Paper: Empirical JEL Classification: M41, M42 Keywords: Financial Distress, Corporate Governance, Auditor Switching, Audit Delay

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