SEC chief accountant shines spotlight on audit committees

2018 ◽  
Vol 19 (4) ◽  
pp. 4-5
Author(s):  
Stephen G. Stroup
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Securities And Exchange Commission ◽  
Audit Committees ◽  
Corporate Boards ◽  
Securities Litigation ◽  
Content Type ◽  
The Public ◽  
Market Risks ◽  
Baruch College

Purpose To explain and analyze remarks concerning the importance and responsibility of corporate audit committees made by US Securities and Exchange Commission (SEC) Chief Accountant Wesley Bricker before the Baruch College Financial Reporting Conference on May 3, 2018. Design/methodology/approach Discusses Mr Bricker’s remarks in three principal areas: the role of audit committees in clearly understanding non-GAAP measures presented to the public, the attentiveness of audit committees to disclosures regarding changes in market risks, and the importance of independent, diverse thinking on corporate boards, and particularly, audit committee, brought by independent directors as an element of strong corporate governance. Findings The coming months may offer a better indication whether Mr Bricker’s speech is simply a specific point of emphasis from the Office of the Chief Accountant or is perhaps intended to foreshadow a contemplated or ongoing enforcement initiative. Originality/value Expert guidance from experienced lawyer with specialties in SEC investigative and enforcement actions, securities litigation, accountants’ defense, white collar criminal defense and corporate investigations

Determinants of IFRS compliance in Africa: analysis of stakeholder attributes

2019 ◽  
Vol 27 (4) ◽  
pp. 573-599 ◽  
Author(s):  
Vincent Tawiah ◽  
Pran Boolaky
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Committees ◽  
Corporate Boards ◽  
African Countries ◽  
Significant Positive Association ◽  
Content Type ◽  
High Compliance ◽  
Chartered Accountants

Purpose This paper aims to examine the drivers of companies’ compliance with International Financial Reporting Standards (IFRS) using the stakeholder salience theory. Design/methodology/approach The authors have used panel data from 205 companies to examine the IFRS compliance level across 13 African countries. This study has also established the relationship between stakeholders’ attributes and firms’ compliance with IFRS. Findings On IFRS compliance, the authors found that the average compliance score among the companies over the period was 73.09 per cent, with a minimum score of 62.86 per cent and a maximum of 85.61 per cent. The authors found a significant positive association between audit committee competence and compliance, as well as among chartered accountants on board. There is less compliance with the latest standards, such as IFRS 3, 7 and 13. Also, IAS 17, 19, 36 and 37 are problematic across the sample. The authors also found that compliance has been increasing over the years. Practical implications For companies, this study provides empirical evidence on the importance of having chartered accountants’ corporate boards, as well as competent audit committees involved in ensuring high compliance with IFRS. The findings also provide valuable information for professional accounting organizations on the role of their members (chartered accountants) in the effectiveness of IFRS compliance. Originality/value This study complements and updates prior studies on IFRS compliance with findings from Africa, a region that has been neglected in the literature. It provides empirical evidence on the importance of chartered accountants sitting on corporate boards in ensuring high compliance with IFRS.

Audit committee effectiveness and financial reporting timeliness

2018 ◽  
Vol 9 (1) ◽  
pp. 34-55 ◽  
Author(s):  
Ahmed Atef Oussii ◽  
Neila Boulila Taktak
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Emerging Market ◽  
Listed Companies ◽  
Audit Committees ◽  
Future Research ◽  
Governance System ◽  
Content Type ◽  
Financial Expertise ◽  
The Impact

Purpose The purpose of this paper is to investigate whether there is any relationship between the effectiveness of an audit committee and the financial reporting timeliness of Tunisian listed companies as proxied by external audit delay (AD). Analysis focuses on five audit committee characteristics: authority, financial expertise, independence, size and diligence. Design/methodology/approach Empirical tests address 162 firm-year observations drawn from Tunisian listed companies during 2011-2013. Findings Multivariate analyses indicate that audit committees with members who have financial expertise are significantly associated with shorter AD. Thus, the results suggest that audit committee financial expertise contributes to the improvement of financial statements’ timeliness. Research limitations/implications The audit committee attributes examined in this study were based on DeZoort et al. (2002) framework. There could be other aspects of audit committee effectiveness such as audit committee tenure and audit committee chair characteristics, which were not addressed in the present study. Thus, future research may consider and examine these other components of audit committee effectiveness. Practical implications Findings have managerial implications. Companies can re-look into how to further improve audit committee composition in order to enhance the timeliness of financial reporting. The issues of audit committee effectiveness and timely reporting also affect regulators and policy makers since they need to play a role in the establishment of effective audit committees and the improvement of financial reporting timeliness. Originality/value This study is one of few that have examined the impact of audit committee effectiveness on ADs in an emerging market country. Findings lend credence to the belief that audit committee members’ financial expertise enhances the quality of financial reporting by firms in a North African market criticized for the lack of maturity of its corporate governance system (Klibi, 2015; Fitch Ratings, 2009).

Audit committee ownership and audit report lag: evidence from Australia

2020 ◽  
Vol 28 (1) ◽  
pp. 96-125
Author(s):  
Md. Borhan Uddin Bhuiyan ◽  
Mabel D’Costa
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Financial Statements ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Audit Report ◽  
Content Type ◽  
External Auditors ◽  
Using Data

Purpose This paper aims to examine whether audit committee ownership affects audit report lag. Independent audit committees are responsible for overseeing the financial reporting process, to ensure that financial statements are both credible and released to external stakeholders in a timely manner. To date, however, the extent to which audit committee ownership strengthens or compromises member independence, and hence, influences audit report lag, has remained unexplored. Design/methodology/approach This paper hypothesizes that audit committee ownership is associated with audit report lag. Further, the author hypothesize that both the financial reporting quality and the going concern opinions of a firm mediate the effect of audit committee ownership on audit report lag. Findings Using data from Australian listed companies, the author find that audit committee ownership increases audit report lag. The author further document that financial reporting quality and modified audit opinions rendered by external auditors mediate this positive relationship. The results are robust to endogeneity concerns emanating from firms’ deliberate decisions to grant shares to the audit committee members. Originality/value The study contributes to both the audit report timeliness and the corporate governance literatures, by documenting an adverse effect of audit committee ownership.

The effect of cash versus equity compensation on audit committee decision-making - evidence from the 2007 Deloitte censure

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Matthew J. Behrend ◽  
Marshall K. Pitman
Keyword(s):  
Decision Making ◽  
Audit Committee ◽  
Audit Committees ◽  
Public Companies ◽  
Content Type ◽  
The Public ◽  
Equity Compensation ◽  
Committee Decision ◽  
Cash Compensation ◽  
Committee Decision Making

Purpose This study aims to investigate the effect of cash versus equity compensation on audit committee decision-making after the Public Companies Oversight Board’s 2007 censure of Deloitte. Design/methodology/approach Using a sample of 2,588 firms, this paper uses two different compensation measurements to empirically examine the effect of audit committee compensation on decision-making. Findings The authors find that audit committee compensation effects the post-censure decision-making of Deloitte’s clients. The results support the hypothesis that cash compensation paid to audit committees influences audit committee members to retain their auditors post-censure. Additionally, there is some evidence to support the hypothesis that equity compensation increases the propensity to switch auditors post-censure. Practical implications This study will be of interest to regulators, policymakers and researchers as it provides further evidence in the area of audit committee decision-making and the effect of cash and stock compensation paid to audit committee members. Originality/value This study provides empirical evidence of the association between audit committee compensation and audit committee decision-making by investigating the effect of cash-based compensation and stock-based compensation on audit committee decision-making.

Board and audit committee effectiveness in the post-ASX Corporate Governance Principles and Recommendations era

2017 ◽  
Vol 43 (10) ◽  
pp. 1137-1151 ◽  
Author(s):  
Maryam Safari
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Financial Reporting ◽  
Boards Of Directors ◽  
Audit Committee ◽  
Management Practices ◽  
Reporting Quality ◽  
Audit Committees ◽  
Content Type ◽  
Aggregate Effect

Purpose The purpose of this paper is to contribute to the corporate governance literature by examining the aggregate effect of board and audit committee characteristics on earnings management practices, particularly in the period following the introduction of the second edition of the Australian Securities Exchange (ASX) Corporate Governance Principles and Recommendations. Design/methodology/approach This paper begins by embarking on an extensive review of extant empirical research on boards of directors and audit committees. Then, the paper reports on the use of a quantitative analysis approach to specify the relationship between board and audit committee characteristics (introduced by the ASX Corporate Governance Council) and the level of absolute discretionary accruals as a proxy for earnings management. Findings The findings suggest that greater compliance with board and audit committee principles is linked to lower earnings management, indicating that deliberate structuring of boards and audit committees is an effective approach for enhancing a firm’s financial reporting quality and providing support for the efficacy of the second edition of principles and recommendations related to boards and audit committees suggested by the ASX Corporate Governance Council. Practical implications This study significantly extends the literature and has notable implications for financial reporting regulators, as the findings regarding the monitoring role of boards and audit committees should be beneficial for future revisions of corporate governance principles and recommendations. Originality/value This study focuses on the aggregate effect of board characteristics recommended by the Australian Corporate Governance Council on earnings management practices, and the results support the effectiveness of the board and audit committee characteristics recommended by the ASX Corporate Governance Council. New directions for future improvements to the principles and recommendations are identified.

Do Former Audit Firm Partners on Audit Committees Procure Greater Nonaudit Services from the Auditor?

2012 ◽  
Vol 88 (1) ◽  
pp. 297-326 ◽  
Author(s):  
Vic Naiker ◽  
Divesh S. Sharma ◽  
Vineeta D. Sharma
Keyword(s):  
Audit Committee ◽  
Auditor Independence ◽  
Securities And Exchange Commission ◽  
Data Availability ◽  
Audit Committees ◽  
Future Research ◽  
Corporate Boards ◽  
Audit Firm ◽  
Sarbanes Oxley ◽  
Nonaudit Services

ABSTRACT: To address potential threats to auditor independence, the Sarbanes-Oxley Act of 2002 (SOX) requires the audit committee to pre-approve nonaudit services (NAS) procured from the auditor. However, the presence of a former audit firm partner (FAP) affiliated with the current auditor on the audit committee could undermine the audit committee's due diligence over the NAS pre-approval process. To alleviate such concerns, the Securities and Exchange Commission approved a three-year “cooling-off” period for appointing audit firm alumni as independent directors. Our analyses show that the presence of both affiliated and unaffiliated FAPs on audit committees does not lead to greater NAS procured from the auditor; rather, FAPs reduce NAS procured from the auditor. Moreover, NAS decline significantly following the appointment of FAPs to the audit committee. Further tests suggest the three-year cooling-off period may not be warranted and deserves further investigation. Our study raises important implications for regulators, policy makers, corporate boards, and future research. Data Availability: Data are publicly available from sources identified in the text.

Audit committee accounting expertise and forward-looking disclosures

2018 ◽  
Vol 41 (2) ◽  
pp. 166-185 ◽  
Author(s):  
Cristina Abad ◽  
Francisco Bravo
Keyword(s):  
Voluntary Disclosure ◽  
Audit Committee ◽  
Relevant Information ◽  
Securities And Exchange Commission ◽  
Audit Committees ◽  
Annual Reports ◽  
Content Type ◽  
Accounting Expertise ◽  
Definition Of ◽  
Forward Looking

Purpose The purpose of this study is to examine how the accounting expertise of audit committee members is associated with the disclosure of forward-looking information. Design/methodology/approach Manual content analysis is used to analyze forward-looking information disclosed in annual reports as well as gather data about the accounting expertise of directors. Regression analysis is performed to study the association between the disclosure variables and the accounting expertise of audit committee members. Findings The results show that the accounting expertise of audit committee members is associated with forward-looking disclosure practices, particularly with information of a financial and strategic nature. Practical implications The evidence has direct implications for companies in the selection of directors, as stakeholders may demand nomination committees to appoint audit committees with the accounting experts. They may also request regulatory actions regarding the structure of the audit committee, as these add to the evidence on the benefits of selecting such experts. Social implications The evidence on the role of accounting expertise could also help the US Securities and Exchange Commission (SEC) to narrow the definition of financial expertise to specifically consider accounting expertise, as is already happening in the EU context. Originality/value This paper extends prior research on corporate governance and voluntary disclosure by showing the association between the company having at least one accounting expert in the audit committee and the level of disclosure of value-relevant information.

Audit committee attributes and cosmetic accounting in Nigeria

2019 ◽  
Vol 35 (2) ◽  
pp. 177-206
Author(s):  
Hussaini Bala ◽  
Noor Afza Amran ◽  
Hasnah Shaari
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Negative Relationship ◽  
Reporting Quality ◽  
Audit Fees ◽  
Financial Accounting ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Accounting Expertise

Purpose The literature on the influence of audit committees (ACs) and cosmetic accounting (CSA) is scarce. This paper aims to examine the influence of AC attributes on CSA and how this relationship is moderated by the audit price (AUPR). Design/methodology/approach The study used pooled logistic regressions to analyse 624 firm-year observations of listed companies in Nigeria from 2008 to 2016. Findings The results show that AC financial accounting expertise, AC legal expertise and female AC membership were negatively related to CSA. The negative relationship is highly pronounced when a firm incurs higher audit fees. Results for the robustness checks were similar, even with changes to the measurements of dependent and independent variables and alternative estimation. Practical implications This study can benefit policymakers and regulators, enabling them to better appreciate the importance of AC attributes and AUPR in curtailing artificial manipulation and enhancing financial reporting quality. Social implications This study can benefit policymakers and regulators, enabling them to better appreciate the importance of AC attributes and AUPR in curtailing artificial manipulation and enhancing financial reporting quality. Originality/value The findings provide an initial insight into the moderating effect of AUPR on the relationship between AC attributes and CSA.

The effectiveness of audit committees for low‐ and mid‐cap firms

2011 ◽  
Vol 26 (7) ◽  
pp. 623-650 ◽  
Author(s):  
Won Sil Kang ◽  
Alan Kilgore ◽  
Sue Wright
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Governance Reform ◽  
Content Type ◽  
Significant Measure

PurposeThe purpose of this paper is to investigate the effectiveness of recommendations made by the Australian Stock Exchange (ASX) relating to audit committees in Australia, and whether they have improved financial reporting quality for low‐ and mid‐cap listed firms.Design/methodology/approachThe authors examine the relation between characteristics of the audit committee and financial reporting quality for listed companies not mandated to comply with these requirements, i.e. low‐ and mid‐cap firms. For a sample of 288 firms, the authors regress measures of audit committee independence, expertise and activity and size on alternative measures of earnings management.FindingsA significant association is found between all three characteristics and lower earnings management. The significant measure for independence is the proportion of independent directors on the audit committee; for expertise, it is that at least one member of the audit committee has an accounting qualification; and for activity and size, it is the frequency of audit committee meetings.Practical implicationsThe results provide support for the mandatory establishment of audit committees for the top 500 (high‐ and mid‐cap) firms introduced by the ASX and suggest those audit committee characteristics which could improve financial reporting quality for low‐ and mid‐cap firms.Originality/valueThe paper examines low‐ and mid‐cap firms in order to complement previous similar studies done for high‐cap firms. It identifies the effects on financial reporting quality of voluntarily choosing to have an audit committee and of the choice of audit committee characteristics, in the period after substantial corporate governance reform. It includes a new measure among audit committee characteristics, industry expertise, which is required in Australia and is new to the literature.

Economic theory and social pressure: audit committee director departures in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
R. Narayanaswamy ◽  
K. Raghunandan ◽  
Dasaratha V. Rama
Keyword(s):  
Economic Theory ◽  
Audit Committee ◽  
Peer Pressure ◽  
Audit Committees ◽  
Corporate Boards ◽  
Content Type ◽  
Company Directors ◽  
The Usa ◽  
Computer Services ◽  
Research Questions

Purpose This study aims to examine the resignations of Indian audit committee directors after a systemic shock (failure of Satyam Computer Services Ltd.). Design/methodology/approach The authors develop the research questions based on interviews with company directors and audit partners, in addition to economic theory. The authors then use archival data to test the research questions. Findings The authors find that social and peer pressure is a very important factor in explaining such departures and provides the basis for some counter-intuitive empirical results, for example, directors were less likely to resign from companies audited by Indian affiliates of PricewaterhouseCoopers even though Satyam was audited by one such auditor and ownership by founding families was not associated with director departures. Research limitations/implications Going beyond economic theory and analyzes can be useful in examining issues related to corporate boards and audit committees. Practical implications Regulators should consider requiring disclosure about director attendance percentages, in addition to the number of meetings, at audit committee – and, perhaps, other board sub-committee – meetings. Social implications Caution is warranted when using results from the USA and other Anglo-Saxon countries to address governance-related issues in India or other Asian countries. Originality/value A triangulation of economic theory and societal norms enables us to gain valuable insights about the resignations of audit committee directors in India.

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