scholarly journals Do boards influence audit quality? A multidimensional analysis

2021 ◽  
Vol 10 (1) ◽  
pp. 125-138
Author(s):  
Radhi Al-Hamadeen ◽  
Turki AlHmoud ◽  
Hasan El-Nader ◽  
Malek Alsharairi ◽  
Firas Almasri
Keyword(s):  
Corporate Governance ◽  
Empirical Evidence ◽  
Boards Of Directors ◽  
Audit Quality ◽  
Financial Statements ◽  
Audit Fees ◽  
Multidimensional Analysis ◽  
Service Firms ◽  
Corporate Boards

This study investigates how corporate boards of directors influence the quality of external audit in a sample of service firms listed on the Amman Stock Exchange (ASE). We contribute to the literature by providing empirical evidence on the efficacy of the corporate governance mechanisms through corporate boards to influence audit quality in an emerging country setting (i.e., Jordan). According to Chua (1986), this is mainstream “market-based” accounting research. We regress multiple dimensions that capture the quality of financial statements’ audit on a group of board of directors (BoD) characteristics for total observations of 225 firm-year obtained for 45 companies during the period (2014-2018). Specifically, the multidimensional analysis of the response variable, audit quality, includes audit firm’s internationalization, audit fees, auditor tenure, and the number of licensed practitioners at the audit firm. Using multiple linear (Panel Least Squares – PLS) and logistic regression models, we document empirical evidence that audit quality is positively affected by the independence and size of boards but negatively affected by CEOs duality, while no influence of the board’s expertise on any measures of the audit quality. The study provides implications for policymakers and investors regarding the signals that firms can send regarding the quality of financial statements audit when complying with the best practices of corporate governance

scholarly journals Corporate Governance, Disclosure Quality, and Cost of Equity: Evidence from Pakistan

2018 ◽  
Vol 6 (2) ◽  
pp. 63-91 ◽  
Author(s):  
Safia Nosheen ◽  
Naveed-Ul-Haq Naveed-Ul-Haq ◽  
Muhammad Faisal Sajjad
Keyword(s):  
Corporate Governance ◽  
Audit Quality ◽  
Financial Statements ◽  
Ordinary Least Squares ◽  
Cost Of Equity ◽  
Disclosure Quality ◽  
Listed Firms ◽  
The Cost ◽  
Governance Disclosure

The link between disclosure of corporate information and the cost of equity in firms is one of the most important issues in finance. This paper aims to examine the connection between corporate governance, disclosure quality of information, and the cost of equity in Pakistani-listed (PSX-listed) firms. Using the Generalized Methods of Movements (Sys-GMM) model, a sample of 167 non-financial firms listed on Pakistan Stock Exchange (PSX) for the period of 2011-2015was analyzed. Sys-GMM estimation was applied to overcome the problem of endogeneity among corporate governance variables. To test the robustness of GMM estimations, we compared the results of pooled ordinary least squares (OLS) and fixed-effect estimations and found they did not overcome the problem of endogeneity, providing spurious results. We found a negative association between cost of equity and disclosure quality of financial statements. The findings suggested that the board size, concentrated ownership and CEO duality, are found as significant factors in reducing the cost of equity of PSX-listed firms. Audit committee independence and audit quality of the firm showed a positive relationship with the firm’s cost of equity. Our findings suggest that employing a high-quality auditor and independent director’s results in increased cost of equity for PSX-listed firms. Furthermore, no significant relationship between independence of the boards and duration of the authorizations of financial statements by the board of directors is found. The results also revealed the investors demand more return on their investments if inadequate and incomplete information is disclosed in the annual reports of the firms. This study provides useful insights for Pakistani corporate governance regulators, the executive management of Pakistani firms, and their investors.

scholarly journals The Relationship between Audit Committee Characteristics, Audit Firm Quality and Companies’ Profitability

2015 ◽  
Vol 7 (2) ◽  
pp. 215
Author(s):  
Laith A Aryan
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Audit Quality ◽  
Financial Statements ◽  
Industrial Sector ◽  
Committee Meeting ◽  
Audit Firm ◽  
The Relationship

<p>Jordan displayed keen interest in corporate governance in terms of enhancing the quality of financial statements and to restore the investors’ confidence. This study aimed to highlight the role of audit committee and external audit in enhancing companies’ profitability. Since there are contradictions in previous studies results, there is a need to test these relationships in Jordanian context to provide empirical evidence on this issue,especially after the corporate governance application became mandatory since 2009. This study has used industrial sector, which include 91 companies, only 69 companies were included in this study, the other 22 companies were excluded either newly listed or delisted during the study period (2009-2014). Multiple regression were used to analyze the data, the result showed positive relationships between audit committee meeting, audit committee size and companies profitability, while no significant relationship between audit committee composition, audit committee members literacy, audit quality and companies profitability. Such results would be beneficial to companies’ corporate governance committees to play their supervisory role. </p>

scholarly journals PENGARUH KOMPETENSI, INDEPENDENSI, PROFESIONALISME, DAN INTEGRITAS AUDITOR TERHADAP KUALITAS AUDIT

2016 ◽  
Vol 3 (1) ◽  
Author(s):  
Endang Sri Utami
Keyword(s):  
Empirical Evidence ◽  
Audit Quality ◽  
Financial Statements ◽  
T Test ◽  
Coefficient Of Determination ◽  
Test Results ◽  
Accounting Profession ◽  
Public Accounting ◽  
The Public

Public accounting profession is a profession that is expected to put confidence as parties can conduct an audit of the financial statements and may be responsible for the opinion given. Of the public accounting profession, the public expects that assessment independent and impartial to the information presented by management companies in the financial statements. This research was conducted with the aim to obtain empirical evidence whether the factors ofcompetence, independence, professionalism, integrity auditor effect on audit quality. T-test results showed that the factors of competence, independence, professionalism auditors effect on audit quality. While factors do not affect the integrity of the auditors on audit quality. The coefficient of determination indicates that the factors of competence, independence, professionalism, integrity of the auditor is able to explain the quality of audits by 85 %, while the remaining 15%is explained by other variables that are not used in this study.

scholarly journals Corporate Governance and Financial Reporting Quality: Preliminary Evidence from Saudi Arabia

2020 ◽  
Vol 4 (1) ◽  
pp. 109-116
Author(s):  
Sarah Al-Khonain ◽  
Khalid Al-Adeem
Keyword(s):  
Corporate Governance ◽  
Saudi Arabia ◽  
Financial Reporting ◽  
Boards Of Directors ◽  
Financial Analysts ◽  
Financial Statements ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
The Impact

The investment climate in the country depends largely on the level of confidence of potential investors, which actualizes the need to provide transparent and quality financial reporting to economic entities. Powerful corporations that have established an effective corporate governance mechanism are able to provide high competitive advantage over the long term, contributing to their financial and economic stability. The purpose of the article is to determine the impact of corporate governance mechanisms on the quality of a company’s financial statements. The corporate governance rules in force in Saudi Arabia were developed in 2006, then revised twice in 2009 and 2015, and only finally approved in 2017. The survey was based on the results of an electronic survey of 56 Saudi financial analysts selected from their LinkedIn profiles (financial analysts were selected by respondents because they play a significant role in the capital markets and are users of financial statements). The author points out that the objectivity of the survey results can be enhanced by expanding the sample of survey participants. The questionnaire contained 11 questions about corporate governance and its contribution to improving the quality of the financial statements of the respective companies. The results of the survey have empirically confirmed that corporate governance is a factor contributing to improving the quality of financial reporting and, consequently, increasing foreign investment inflows, so compliance with the new corporate governance rules is extremely important for Saudi Arabia corporations. Improvements in corporate governance mechanisms are perceived by members of boards of directors, audit committees, and internal audit departments as one of the main factors in improving the quality of financial reporting. Keywords: corporate governance; Financial Statements; financial analysts; transparency of reporting; investors; Saudi Arabia.

scholarly journals The Effect of Corporate Governance and Audit Quality on Disclosure Quality: Evidence from Tehran Stock Exchange

2016 ◽  
Vol 25 (1) ◽  
pp. 32 ◽  
Author(s):  
Mahdi Salehi ◽  
Mahdi Moradi ◽  
Navid Paiydarmanesh
Keyword(s):  
Corporate Governance ◽  
Regression Models ◽  
Audit Quality ◽  
Stock Exchange ◽  
Financial Statements ◽  
Disclosure Quality ◽  
R Software ◽  
The Subject ◽  
Independent Audit

The current study examines the effect of audit quality and internal and external corporate governance on the quality of disclosure of financial statements. In order to achieving the objectives of the study 7 hypotheses about audit quality and 7 hypotheses about internal and external corporate governance are postulated in the current study during 2009-2014 in Iran. Data analyzed in two regression models via the R software. The results indicate that there is no significant positive relationship between independent audit quality and the quality of disclosure of financial statements information, but there is a significant relationship between corporate governance and the quality of disclosure of financial statements information. So far, the current study is the first paper on the subject which conducted in the developing country such like Iran, the results of the study may give the strength to the auditing literature.

Timeliness of Tunisian Audit Reports: An Empirical Investigation based on Ownership and Partnership Visions

2015 ◽  
Vol 5 (3) ◽  
Author(s):  
Mondher Fakhfakh
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Empirical Investigation ◽  
Financial Statements ◽  
Qualitative Feature ◽  
Transmission Delays ◽  
Emerging Country ◽  
Audit Reports ◽  
Audit Information

Timeliness of audit reports is a qualitative feature that enhances the usefulness of audited financial statements. As an emerging country, Tunisia has modernized its accounting legislation to enhance the quality of financial reporting. This legislation encourages independent auditors to optimize the transmission delays of audit reports. The authorities assume that the satisfaction of stakeholders is secured by regulating disclosure of audit reports. Our research analyses the date of issue of Tunisian audit reports and timeliness of audit information for shareholders and all users of financial statements (stakeholders). This paper provides new empirical evidence about the timeliness of audit reports in Tunisia. It holds two dates that influence the needs of users of financial statements: the date of signature of the auditors and the date of publication of the audit reports in the financial bulletin. The same article discusses the variability of the timeliness of audit reports and the factors that explain the delay information.

Audit Quality of Chinese ADR Engagements

2016 ◽  
Vol 31 (2) ◽  
pp. 25-43 ◽  
Author(s):  
Aloke (Al) Ghosh ◽  
Elisabeth Peltier ◽  
Cunyu Xing
Keyword(s):  
Audit Quality ◽  
Emerging Market ◽  
Financial Statements ◽  
Foreign Firms ◽  
American Depositary Receipts ◽  
Reverse Mergers ◽  
Chinese Companies ◽  
Big 4 ◽  
Depositary Receipts

SYNOPSIS The controversy over Chinese reverse mergers has led to concerns about the audit quality of all U.S.-listed Chinese companies. Because a sizeable number of foreign firms cross-list their shares as American Depositary Receipts (ADRs) issued by U.S. depositary banks (as opposed to direct listings), we study how auditors have managed their audits of Chinese ADRs. Our motivation for examining Chinese ADRs is based on the findings that cross-listing via the ADR process is beneficial for U.S. shareholders. We find that relative to ADRs from countries other than China, and relative to directly listed Chinese companies, Chinese ADRs are more likely to be associated with a Big 4 auditor and are less likely to restate prior-period financial statements. We also find that Chinese ADRs pay significantly higher fees than other emerging market ADRs and Chinese direct-listings. Collectively, these results suggest high audit quality for Chinese ADRs, which is in sharp contrast to the Chinese direct-listing results. Using Tobin's Q as a measure of market value, we find that the stock market rewards Chinese ADRs, indicating that investors incorporate the benefits of higher audit quality when evaluating Chinese ADRs.

An Analysis of Cross-Sectional Differences in Big and Non-Big Public Accounting Firms' Audit Programs

2006 ◽  
Vol 25 (1) ◽  
pp. 27-48 ◽  
Author(s):  
Hans Blokdijk ◽  
Fred Drieenhuizen ◽  
Dan A. Simunic ◽  
Michael T. Stein
Keyword(s):  
Risk Assessment ◽  
Empirical Evidence ◽  
Audit Quality ◽  
Audit Fees ◽  
Public Accounting ◽  
Accounting Firms ◽  
Big 5 ◽  
Public Accounting Firms ◽  
Audit Approach ◽  
Control Risk

A significant body of prior research has shown that audits by the Big 5 (now Big 4) public accounting firms are quality differentiated relative to non-Big 5 audits. This result can be derived analytically by assuming that Big 5 and non-Big 5 firms face different loss functions for “audit failures” and is consistent with a variety of empirical evidence from studies of audit fees, auditor changes, and the stock price reaction to audited earnings. However, there is no existing evidence (of which we are aware) concerning the underlying production differences between Big 5 and non-Big 5 audits. As a result, existing empirical evidence cannot distinguish between the possibility that Big 5 audits are simply perceived to be different (e.g., by investors) or actually differ in how they are produced. Our research objective is to identify the production characteristics of audit engagements that may explain the differences in expected audit quality between Big 5 and non-Big 5 firms. In this archival study, we examine the total audit effort and the allocation of effort to four audit phases—planning, (control) risk assessment, substantive testing, and completion—for a cross-section sample of 113 audits of Dutch companies in 1998/99 by 14 public accounting firms. We find that, after controlling for client characteristics: (1) both types of auditors exert about the same amount of total audit effort; (2) Big 5 auditors allocate relatively more effort to planning and (control) risk assessment, and relatively less to substantive testing and completion; and (3) client size, use of the business-risk-based audit approach, and reliance on client internal controls affect audit hours differently for the two auditor types. We conclude that the Big 5 firms actually produce a higher audit quality level, and that this quality difference is related to how audit hours are deployed in a more contextual and less procedural audit approach.

scholarly journals An Examination of the Effects of Change in Committee Chair on Audit Quality

2017 ◽  
Vol 6 (4) ◽  
pp. 52
Author(s):  
Izhar Haq ◽  
Teresa Lang ◽  
Hongkang Xu
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Committee Chair ◽  
The Absolute ◽  
Predicted Values ◽  
The Relationship ◽  
A Company

This study uses GMI Ratings directorship data from 2008 to 2013 along with the associated financial data to examine the relationship between audit committee chair change with the absolute discretionary accruals in the financial statements of the reporting companies.  Our results suggest that audit committee chair change is positively associated with the absolute discretionary accruals.  Specifically, absolute discretionary accruals are significantly higher when there is a change in the audit committee chair.  These results are consistent with prior research that deviations from the predicted values of accruals is an indicator of “poor” audit quality.  An additional finding of this paper is that a person younger than 60 is more likely to be a new audit committee chair when there is a change and therefore will have less experience and contacts than the outgoing chair. An important implication of these results is that audit committee chair change can have a significant impact on the quality of the financial statements of a company as well as on the audit quality.

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