The Even–Odd Nature of Audit Committees and Corporate Earnings Quality

2016 ◽  
Vol 33 (1) ◽  
pp. 98-122 ◽  
Author(s):  
Huasheng Gao ◽  
Jun Huang
Keyword(s):  
Audit Committee ◽  
Earnings Quality ◽  
Audit Committees ◽  
Voting Theory ◽  
Financial Restatements ◽  
Corporate Earnings ◽  
Lower Likelihood ◽  
Equity Ownership

We apply voting theory to the context of audit committees and examine how the even–odd nature of audit committees is related to earnings quality. We hypothesize that an audit committee with an odd number of directors can improve the committee’s voting efficiency by better aggregating directors’ information and thus enhance the quality of committee decisions, as compared with an audit committee with an even number of directors. Supporting this implication, we find that an odd audit committee is associated with lower likelihood of financial restatements than an even audit committee, and that this relation is stronger when the committee members have more heterogeneous opinions, hold less equity ownership, are in a smaller audit committee, and face a more entrenched management.

scholarly journals Corporate Social Responsibility, Audit Committee Expertise, and Financial Reporting: Empirical Evidence from Korea

2021 ◽  
Vol 13 (19) ◽  
pp. 10517
Author(s):  
Haeyoung Ryu ◽  
Soo-Joon Chae ◽  
Bomi Song
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Financial Reporting ◽  
Audit Committee ◽  
Earnings Quality ◽  
Audit Committees ◽  
Accounting Expertise ◽  
Corporate Social

Corporate social responsibility (CSR) involves multiple activities and is influenced by the cultural and legal environment of the country in which a firm is located. This study examines the role of audit committees’ (AC) financial expertise in the relationship between CSR and the earnings quality of Korean firms with high levels of CSR. Using a multivariate analysis, it investigates whether the ACs that include members with accounting expertise, finance expertise, or supervisory expertise individually affect a firm’s decision making. It also examines how ACs with diverse expertise contribute toward improving the financial reporting quality of firms with high levels of CSR. The results demonstrate that when there is a certified accountant in the AC of a firm that practices CSR based on ethical motivation, the earnings management through discretionary accruals is more strictly controlled. This is more effective when the AC comprises members with accounting and non-accounting expertise. This finding implies that the AC plays a positive role in improving the accounting information quality of firms with CSR excellence. Moreover, while the role of accounting experts in the AC is important for maintaining high earnings quality, combining other types of expertise creates synergy.

scholarly journals An Investigation on the Audit Committees Effectiveness: The Case for GLCs in Malaysia

2011 ◽  
Vol 13 (3) ◽  
pp. 287 ◽  
Author(s):  
Nurul Nazlia Jamil ◽  
Sherliza Puat Nelson
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Financial Expertise ◽  
Monitoring Mechanism ◽  
The Impact

Financial reporting quality has been under scrutiny especially after the collapse of major companies. The main objective of this study is to investigate the audit committee’s effectiveness on the financial reporting quality among the Malaysian GLCs following the transformation program. In particular, the study examined the impact of audit committee characteristics (independence, size, frequency of meeting and financial expertise) on earnings management in periods prior to and following the transformation program (2003-2009). As of 31 December 2010, there were 33 public-listed companies categorized as Government-Linked Companies (GLC Transformation Policy, 2010) and there were 20 firms that have complete data that resulted in the total number of firm-year observations to 120 for six years (years 2003-2009).  Results show that the magnitude of earnings management as proxy of financial reporting quality is influenced by the audit committee independence. Agency theory was applied to explain audit committee, as a monitoring mechanism as well as reducing agency costs via gaining competitive advantage in knowledge, skills, and expertise towards financial reporting quality. The study is important as it provides additional knowledge about the impact of audit committees effectiveness on reducing the earnings management, and assist practitioners, policymakers and regulators such as Malaysian Institute of Accountants, Securities Commission and government to determine ways to enhance audit committees effectiveness and improve the financial reporting of GLCs, as well as improving the quality of the accounting profession.     

scholarly journals KOMITE AUDIT UNTUK MENINGKATKAN TATA KELOLA PEMERINTAHAN DAN PENYAJIAN LAPORAN KEUANGAN DALAM RANGKA PENINGKATAN KINERJA PEMERINTAH DAERAH (STUDI KASUS PEMERINTAH DAERAH KABUPATEN BELITUNG)

2014 ◽  
Vol 1 (1) ◽  
pp. 1
Author(s):  
Alexander Ikhsan ◽  
Antar MT Sianturi
Keyword(s):  
Local Government ◽  
Audit Committee ◽  
Good Governance ◽  
Financial Statements ◽  
Financial Statement ◽  
Audit Committees ◽  
Government Performance ◽  
Qualitative Descriptive ◽  
Improved Performance

This research is a qualitative descriptive study entitled “Audit Committee to Improve Governance and Financial Statement in order to Improved Performance of Local Government (Case Study of District Government Belitung)”. The purpose of this study was to determine how much influence of the audit committee in the local government in order to improve governance and the quality of local government financial statement, and its associations with local government performance. Measuring the importance of the audit committee, which was measured using interviews with 15 respondents who have an influence on governance in the Belitung District Based on these results, we can conclude that audit committees in local government will improve the governance and the quality of local government financial statements presentation. And from the results of this study also found that the good governance and quality of local government financial statements presentation will improve the overall local government performance

Audit Committee Characteristics and Earnings Quality

2020 ◽  
pp. 23-49
Author(s):  
Fatima Albedal ◽  
Allam Mohammed Hamdan ◽  
Qasim Zureigat
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Earnings Quality ◽  
Listed Companies ◽  
Independent Variables ◽  
Pooled Data ◽  
Data Regression ◽  
Code Of Corporate Governance ◽  
The Relationship

This chapter investigates the relationship between the audit committee and earnings quality of listed companies in Bahrain Bourse and to examine whether those companies comply with the obligatory code of corporate governance. The sample of this study includes 40 companies listed in Bahrain Bourse for the period 2013-2017. The model of the study tested the relationship between the independent variables of audit committee characteristics and the dependent variable of earnings quality using pooled data regression. The findings of the study showed that the Bahraini listed companies comply and follow the code of corporate governance and some audit committee characteristics have an impact on earnings quality.

scholarly journals The Impact of the Audit Committees' Properties on the Quality of the Information in the Banking Financial Reports: A Survey on Saudi Commercial Banks

2017 ◽  
Vol 10 (11) ◽  
pp. 175
Author(s):  
Mwafag Rabab’ah ◽  
Omar Al-Sir ◽  
Ali A. Alzoubi
Keyword(s):  
Commercial Banks ◽  
Audit Committee ◽  
Audit Committees ◽  
Financial Reports ◽  
Audit Team ◽  
The Impact

This study aims to identify the impact of the audit committees' properties on the quality of the information of the banking financial reports in the Saudi commercial banks by identifying the effect of identifying tasks and duties, independence, accounting and banking experience and efficiency of the audit committee on achieving the quality of the Saudi banking and financial reports. 110 questionnaires were distributed on the research sample and 105 questionnaires were received and analyzed through ANOVA. Results indicate that the availability of the audit committees' properties affect increasing the quality of the financial reports in the Saudi banking at the level of properties as a whole where the (P) probable value was (0.000 ), which is less than 0.05. It represents the functions and duties of the audit committee, the committee's independence in banks, the availability of the accounting and banking experience for the members of the audit committee and the efficiency of the audit committees at banks. The study recommends more emphasis on the diversity of the experiences of the members of the audit team and thus; the committee can performs its functions in a more efficient and effective way.

scholarly journals Pengaruh Good Corporate Governance Terhadap Kualitas Laba Perusahaan (Studi pada Perusahaan Sektor Consumer Goods dalam Bursa Efek Indonesia Periode 2016-2018)

2020 ◽  
Vol 12 (2) ◽  
pp. 215-222
Author(s):  
Lisa J. C. Polimpung
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Coefficient Of Determination ◽  
Managerial Ownership ◽  
The Public ◽  
Good Corporate Governance ◽  
Corporate Earnings ◽  
Earning Quality

Financial statements reflect the state of the company where in a financial statement a person can get various kinds of information where one of them is profit. Before investors make an investment they will use information about earnings for their consideration. This causes earnings quality to be one of the most important aspects because it is used in evaluation materials to measure the performance of a company because investors expect quality earnings. Earnings quality is one of the driving factors used by investors before making investment decisions. This study wants to see whether the variables contained in good corporate governance which are divided into managerial ownership, institutional ownership, the size of the public accounting firm, audit committee and committee board have an influence on the quality of corporate earnings. This study conducted a study of companies listed on the Indonesia Stock Exchange in the period 2016-2018 where the number of observations was 60 observations and examined using the calculation of the coefficient of determination and multiple regression. The results found are managerial ownership and audit committee have an influence on earnings quality while other variables have no influence.  Keywords: Good Corporate Governance, Earning Quality

Peran Komite Audit Independen Sebagai Pemoderasi Hubungan Antara Environmental Awareness Dan Tanggung Jawab Sosial Perusahaan Dalam Meningkatkan Kualitas Laba Perusahaan Konstruksi Di Indonesia

Liquidity ◽  
2018 ◽  
Vol 5 (1) ◽  
pp. 10-18
Author(s):  
Darmansyah Darmansyah
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Significant Relationship ◽  
Audit Committee ◽  
Earnings Quality ◽  
Environmental Awareness ◽  
Construction Companies ◽  
Corporate Social ◽  
Independent Audit

Achievement of earnings quality is something indispensable for the company, plays an important and central in the world of accounting. That's where the accounting profession is at stake. Corporate Social Responsibility (CSR) to be responsible for the company, and increased public awareness of the importance of protecting the environment is very high. The audit committee has an important role in enhancing the value of the company. The purpose of this study was to analyze the influence of environmental awareness and CSR with the audit committee as moderating in improving the quality of corporate profits construction purposes. The method of analysis using the PLS program Warp 4.0. The results showed that no significant relationship between the environmental awareness of the quality of earnings of construction companies. There is a significant relationship between CSR affects the quality of earnings. While the Independent Audit Committee does not moderate the effect of CSR on Earnings Quality construction companies. Independent Audit Committee has not been instrumental in improving the quality of earnings, but it is expected in the future could increase the role of good corporate governance and monitor the implementation of corporate social responsibility to be better.

Audit Committee Quality and Internal Control: An Empirical Analysis

2005 ◽  
Vol 80 (2) ◽  
pp. 649-675 ◽  
Author(s):  
Jayanthi Krishnan
Keyword(s):  
Internal Control ◽  
Audit Committee ◽  
Control Sample ◽  
Three Dimensions ◽  
Audit Committees ◽  
Control Problems ◽  
Time Period ◽  
Material Weaknesses ◽  
Recent Policy

I examine the association between audit committee quality and the quality of corporate internal control. While information on the quality of internal control is not generally available, companies changing auditors are required to disclose any internal control problems that were pointed out by their predecessor auditors. The empirical results are based on a comparison of companies disclosing such internal control problems with a control sample of companies changing auditors but not disclosing internal control problems. Audit committee quality is measured in three dimensions: its size, its independence, and its expertise. The internal control problems are observed at two levels of increasing seriousness: reportable conditions and material weaknesses. The sample time period precedes the effective dates of recent policy changes regarding audit committees. The results indicate that independent audit committees and audit committees with financial expertise are significantly less likely to be associated with the incidence of internal control problems. This is true for both levels of internal control problems. The results are consistent with recent policy emphasis on audit committee independence and expertise.

Client Importance and Earnings Management: The Moderating Role of Audit Committees

2011 ◽  
Vol 30 (3) ◽  
pp. 125-156 ◽  
Author(s):  
Vineeta D. Sharma ◽  
Divesh S. Sharma ◽  
Umapathy Ananthanarayanan
Keyword(s):  
Best Practices ◽  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Positive Association ◽  
Auditor Independence ◽  
Economic Importance ◽  
Audit Committees ◽  
Inside Ownership

SUMMARY This study provides empirical evidence on how the association between the economic importance of a client to the auditor and earnings management is moderated by the audit committee. We employ city office-level client importance fee-based measures, both performance-adjusted discretionary total and current accruals as proxies for earnings management, and a measure of audit committee best practices. We document a positive association between client importance and our two proxies for earnings management. This association is stronger for income-increasing earnings management. However, the association between client importance and earnings management is more pronounced when the audit committee does not meet best practices. We infer that the economic importance of a client appears to threaten auditor independence and thus the quality of financial reporting, but only when the audit committee exhibits characteristics associated with the provision of weak oversight. We also find that the association between client importance and earnings management is conditional on inside ownership, growth, leverage, and firm size, which are moderated by the audit committee. This study is the first to demonstrate that audit committees can moderate threats to auditor independence thus protecting the quality of financial reporting. The study discusses potential implications for policy making and empirical research.

scholarly journals Presence of Quality of Audit Committee and Organization’s Monetary Data: An In-depth Analysis

2021 ◽  
Vol 3 (1) ◽  
pp. 77-91
Author(s):  
Ashfaque Ali Banbhan ◽  
Najia Shaikh ◽  
Khalid Hussain Abbasi
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Stock Exchange ◽  
Practical Importance ◽  
Positive Association ◽  
Audit Committees ◽  
Corporate Boards ◽  
Audit Process ◽  
Depth Analysis

All financial regulatory institutions legally bound their listed companies todisclose the information regarding the formulation of their audit committees.This study quantitatively investigates whether the quality of the auditcommittees affects the quality of a firm’s financial information. Using the dataof publicly listed non-financial companies of Pakistan Stock Exchange, thisresearch found a positive association between audit committee qualitymeasures and the firm’s quality of reported earnings. This study extends theunderstanding of measures for audit committee quality to stabilize thefinancial reporting process as it relates to the ongoing discussion byresearchers and financial regulators. Additionally, the study also increasesthe understanding of the concept of external audit quality for various partieswhich are involved in deliverance of good corporate governance practices; forexample, audit committees, external auditors, corporate boards, and topmanagement team. The study also explores the influencing factors, internal aswell as external, in the audit process by constructing its meaning andexplaining its practical importance. This detailed exploration andinvestigation into the procedures of audit quality are vital because auditing isthe process through which numbers in financial reports are checked and reevaluated for any potential clerical errors and omissions

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