scholarly journals Audit Committee Characteristics and Earnings Management: The Case of Bahrain

2017 ◽  
Vol 7 (1) ◽  
pp. 12
Author(s):  
Omar Issa Juhmani
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Management Practices ◽  
Emerging Market ◽  
Control Variable ◽  
Business Environment ◽  
Good Opportunity ◽  
Audit Firm ◽  
The Relationship

This study examines the effectiveness of some audit committee (AC) characteristics to monitor management behavior with the respect to their incentives to manage earnings. Bahraini listed companies on Bahrain Bursa for the year 2012 to 2014 have been investigated to analyze the relationship between AC characteristics and earnings management. The AC characteristics examined are AC independence, AC size, AC meetings and AC financial experts. Multivariate regression modelis used to examine the relationship between earnings managementasdependent variable and AC characteristics as independent variables and other firm-specific attributes, as control variables. As a small developing market, Bahrain’s unique business environment and context offer a good opportunity and provides a useful setting for examining the effectiveness of AC characteristics in detecting and preventing earnings management practices. The results show that discretionary accruals as a proxy for earnings management is negatively associated with AC size and AC financial experts, but positively associated audit firm size as control variable. However, the results do not show a significant relationship between AC independence, AC meetings, company size, leverage and earnings management. This study extends the literature on the monitoring function of the AC on earnings management, and contributes geographically to the financial reporting process and earnings management literatures by analyzing data from an emerging market and providing useful information for the corporations, accounting profession and the regulators on the effective practice of ACs.

scholarly journals Diversity of Internal Governance and Financial Reporting Quality: Post-GFC of an Emerging Market

2019 ◽  
Vol 8 (2S2) ◽  
pp. 399-410
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Emerging Market ◽  
Reporting Quality ◽  
Emerging Economy ◽  
Board Diversity ◽  
Economic Reason ◽  
Listed Firms ◽  
Prior Literature ◽  
The Relationship

We examine whether wide-ranging board diversity reduce earnings management from the emerging market of Malaysia. We contribute to the prior literature in several ways. First, while previous literature are mainly focusing on the developing economy, our study is the first that examine the relationship between all-inclusive set of diverse board characteristics and earnings management from the emerging economy. Second, we concentrate to the post-GFC period, where we intentionally avoid the GFC, a situation where managerial opportunistic behaviour to engage in earnings management is more prevalent due to economic reason. Third, we cover the potential complementary or substitutive effects of board diversity characteristics on earnings management. Using 1400 listed firms in emerging market of Malaysia over the period of 2009-2015, in contrast to our prediction, our findings demonstrated that the relationship between board diversity characteristics and earnings management in the Malaysia is mixed. We therefore conclude that the diversity mechanism that work well in the developing countries might not necessarily compatible to the emerging economy such as Malaysia.

scholarly journals AN INVESTIGATION ON THE EFFECT OF AUDIT COMMITTEE ON FINANCIAL REPORTING QUALITY IN PRE AND POST IFRS ADOPTION: EVIDENCE FROM MALAYSIAN COMPANIES

2020 ◽  
Vol 8 (2) ◽  
pp. 25-35
Author(s):  
Citrawati Jatiningrum ◽  
Fauzi ◽  
Rita Irviani ◽  
Mujiyati ◽  
Shahanif Hasan
Keyword(s):  
Earnings Management ◽  
Empirical Evidence ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Ifrs Adoption ◽  
Significant Difference ◽  
The Relationship

Purpose of study: This study sought to investigate the effect of the audit committee on Financial Reporting Quality (FRQ), explicitly focuses on the period pre- and post-mandatory IFRS adoption in Malaysia. The Financial Reporting Quality in this study proxied by earnings management. Malaysian. Methodology: The sample study has covered 81 listed companies on Bursa Malaysia, with 567 observations, which examined the time of 2009 to 2015. The relationship was analyzed by statistical multiple regression linear methods and also examined the significance of differences between pre and post IFRS adoption by paired sample t-test. Result: The main finding reveals that the relationship between the audit committee and financial reporting quality after IFRS adoption in Malaysia has more significant. However, empirical evidence showed that the post period of mandatory IFRS evidently no significant difference level of earnings management practice. This result indicates that the IFRS adoption cannot reduce managerial discretion yet and the possibility for EM manipulation for Malaysian companies. Implication/Application: This finding has critical implications for regulators and policymakers, that the consequences of IFRS adoption do not increase the quality of financial reporting when EM practices still continue in the different forms. Novelty/Originality of this study: This study gives empirical evidence that there are differences in relationship level between audit quality and earnings management in the period before and after IFRS mandatory adoption in Malaysia companies.

scholarly journals An Investigation IFRS Adoption in Malaysia on The Relationship between The Audit Committee and Quality of Financial Statement

2018 ◽  
Vol 2 (2) ◽  
pp. 115-122
Author(s):  
Citrawati Jatiningrum ◽  
Fauzi Fauzi ◽  
Rita Irviani ◽  
Mujiyati Mujiyati ◽  
Shahanif Hasan
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Financial Statement ◽  
Committee Meeting ◽  
Ifrs Adoption ◽  
Financial Expertise ◽  
The Relationship ◽  
Post Period

Audit committees are one of Corporate Governance (CG) mechanisms which are the significant factor in improving its role in inhibiting financial statement fraud (Choi, Jeon & Park, 2004; Habbash, 2010; Soliman & Ragab, 2014). Quality of the Financial Statement emphasised as being in compliance with accounting standards accepted in general, the disclosure scale, and reported numbers although this is not merely a task for the IFRS (Cascino & Gassen, 2010). In recent years, the issue of IFRS adoption in developed and developing countries have been a great deal of attention from many researchers. However, regarding the relationship between the Audit Committee and Quality of Financial Statement with IFRS requirements is still questioning. In fact, the results obtained from some previous researches are inconsistent. Therefore, the objectives in this study are aims to investigate whether post the mandatory IFRS adoption in Malaysia would limit earnings management practice in highlights of governance monitoring on the quality of financial reporting in this environment. This paper gives some evidence: 1) The effect of pre- and post IFRS adoption in Malaysia in the relationship between the Audit Committee and earnings management adoption. 2) examine the differences of the level earnings management on two periods of IFRS adoption in Malaysia. Quality of Financial statement in this study was measured by the level of earnings management with discretional accrual (DA) proxy. The audit committee variable measured by Audit Committee Independence (ACIND), Audit Committee Financial Expertise (ACFEX), Audit Committee Meeting (ACMEET), Audit Committee Size (ACSIZE) and control variable in this study using Board Size (BRDSIZE) and Firm Leverage (FRMLEV). The sample of this study including the two main time periods, there are pre-IFRS adoption and post-IFRS adoption. Using 81 listed companies in Malaysia as a sample, with 567 observations is analysed from 2009 to 2015 (7 years observations) with purposive judgement sampling selection. For seven years, a total of 567 observations is analysed. The pre- IFRS adoption period was tested from 2009 through 2011, and the post-IFRS adoption was tested from 2012 through the end of 2015. The findings in this study with multiplied regression analysis revealed that the hypothesis test in a period of pre- and post IFRS adoption ACFEX and FIRMLEV statistically were significance at 5% level. It means that Audit Committee Financial Expertise (ACFEX) have a significant effect on earnings management practise. According to the result found in the post IFRS adoption period, Audit Committee Meeting (ACMEET) is significant. It means that the frequency of audit committee meetings could be decreasing the level of discretionary accrual. The evidence also unveils both of ACIND and ACSIZE at 5 % level p-value is not significant. The most important result finding on pre- and post period of IFRS adoption in Malaysia provide evidence that based on the statistically significant was upward or the relation more significantly. However, this study also reported with paired sampled test analysis there was no significant difference between the level of earnings management in pre- and post period the adoption of IFRS in Malaysia at 5% level significance.  An important contribution this study has the impact on practices and has implications useful for regulators. The study provides empirical evidence that a relationship between the audit committee and earnings management in the case of IFRS adoption. In contributing to the strength of governance quality and FRQ need to be revisited, especially after mandatory IFRS adoption. Though the audit committee and audit quality are implicitly mentioned in the CG act, it is recommended that formulates specific rules relating to the quality of Financial Reporting. In this regard, it is suggested that company reports would be presented high quality in financial reporting to provide appropriate responses to recommendations made in the reports. Finally, these findings suggest that CG practices in Malaysian that have its own peculiar characteristics compared to other emerging economies.      

AUDIT COMMITTEE AND AUDIT CHANGE: EMPIRICAL EVIDENCE FROM THE EMERGING MARKET

2012 ◽  
Author(s):  
Zaitul Zaitul
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Practical Implication ◽  
Emerging Market ◽  
Reporting Quality ◽  
Theoretical Implication ◽  
Financial Reporting Quality ◽  
Financial Expertise ◽  
The Relationship

This study aims to investigate the relationship between audit committee and audit change in listed Indonesia Company. We use four variables for audit committee that is independence, size, financial expertise and activity. Besides, this study also uses three control variables (ROA, LEV, and SIZE). By using the Binary Logic Model (BLM) with panel data for 654 observation, we find that all hypotheses are rejected which means that there is no role of audit committee in determining the audit change. However, big and company with the higher leverage is less likely to change audit, firm. This finding has a practical and theoretical implication. For practical implication, regulator or government agent can increase the financial reporting quality by improving the role of audit committee by changing related mechanism.

Audit committee and financial reporting quality: the moderating effect of audit quality

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sana Mardessi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Reporting Quality ◽  
Moderating Effect ◽  
Real Earnings Management ◽  
Financial Reporting Quality ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this study is to address the impact of audit quality on financial reporting quality proxied by real earnings management. To further clarify the mentioned links, this study empirically assesses the moderating effect of audit quality. Design/methodology/approach The study is based on a sample consisting of 90 non-financial companies that are listed in the Amsterdam stock exchange in AEX all share index over the 2010–2017 period. This study applies a quantitative approach and secondary data as the main source of information for analysis. This paper performs an ordinary least squares regression to examine the moderating effect of audit quality on the relationship between financial reporting quality. Findings Empirical findings demonstrate that corporate governance mechanism, mainly independence members, financial expert and audit committee size has a statistically significant relationship with real earnings management. However, the effect of audit committee meetings on real earnings management is not significant. There is also evidence that audit quality moderates the audit committee – real earnings management links. Originality/value This study extends the existing literature by examining the moderating effect of audit quality on the relationship between financial reporting quality proxied by real earnings management in the Dutch context.

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.

scholarly journals MODERATING ROLE OF SHARIAH COMMITTEE QUALITY ON THE RELATIONSHIP BETWEEN AUDIT COMMITTEE AND MALAYSIAN TAKAFUL PERFORMANCE

2020 ◽  
Vol 2 (01) ◽  
pp. 19
Author(s):  
Monther Eldaia ◽  
Saddam Ali Shatnawi ◽  
Mustafa Mohamad Hanefah ◽  
Ainulashikin Binti Marzuki
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Management Practices ◽  
Governance Structure ◽  
General Context ◽  
Financial Reports ◽  
Control Body ◽  
The Relationship

The moderating effect of Shariah Committee Quality (SCQ) on the relationship between Audit Committee (AC) characteristics and Malaysian Takaful performance remains a challenge that is yet to be resolved. Malaysia plays a leader role in Muslim countries in Islamic Finance especially in Takaful industry and Shariah committee roles and duties. AC characteristics have a significant effect on corporate financial performance. The fundamental AC role is to supervise the corporate’s financial reporting practice, review of financial reports, auditing practice, internal accounting controls, and risk management practices. AC characteristics plays a crucial role in the overall Malaysian Takaful companies which is supposed to enhance financial performance. Hence, SCQ as part of the internal governance structure and control body of the institution, thereby, ensure Shariah compliance in all transactions and activities, and enhancing the credibility of institutions in the eyes of its shareholders and customers. SCQ can potentially moderate the relationship between AC and Malaysian Takaful performance. As an important mechanism of Corporate Governance (CG), In addition, agency theory and stewardship theory were used to develop the hypotheses.  Several results of the previous literature were found fraternized, and inconsistent regarding the SCQ effect on firm performance or its effect on AC characteristics in general context, while the literature on Malaysia context remain scarce. It is expected that this SCQ moderation may considerably improve corporate performance by determining the strength or weakness of the relationship between AC characteristics and firm performance. Therefore, this paper conceptualized that ‘SCQ’ moderates the relationship between AC Chairman Specialization, Shariah Background, AC Independence and Meeting frequency, and Malaysian Takaful performance.

scholarly journals Corporate governance and earnings management: Empirical evidence from Nigeria

2015 ◽  
Vol 12 (4) ◽  
pp. 312-326 ◽  
Author(s):  
Peace Onuwabhagbe Okougbo ◽  
Elewechi Okike
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Management Practices ◽  
Current Drive ◽  
Return On Assets ◽  
Foreign Investments ◽  
Policy Makers ◽  
Sub Saharan ◽  
The Relationship

This study contributes to the literature by providing a sub-Saharan African economy perspective on the relationship between corporate governance and earnings management, based on evidence produced from the accounts of listed companies in one of Africa’s largest economies, Nigeria. Using the Modified Jones model to estimate the discretionary accruals, the study examines whether CEO duality, board size and audit committee independence are able to restrain earnings management practices in the private sector in Nigeria. The results reveal there is a positive significant relationship between the size of the board, return on assets and earnings management. The study proposes that policy makers ensure that firms practise maintaining increasing levels of profits and desist from making losses so as to preclude downward management of earnings. This is essential in the current drive to attract foreign investments into the Nigerian economy.

scholarly journals Impact of internal ownership on the monitoring and mitigating mechanisms of earnings management practices

2017 ◽  
Vol 14 (2) ◽  
pp. 289-295 ◽  
Author(s):  
Anas Najeeb Mosa Ghazalat ◽  
Md.Aminul Islam ◽  
Idris Bin Mohd Noor
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Board Of Directors ◽  
Management Practices ◽  
Business Environment ◽  
Family Ownership ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
The Board Of Directors ◽  
The Relationship

This paper attempts to review on how the effectiveness of board of directors and the executive compensations are moderated by internal ownership such as managerial and family ownership to mitigate earnings management. Most of prior studies focused on the traditional interaction among corporate governance mechanisms and earnings management, thus neglected that the variance of these practices that can be attributed to the business environment and the nature of ownership structure. This paper revisits the literature on the relationship between the factors of effectiveness of the board of directors in the individual level such as board independence, size, meeting frequency, CEO duality, audit and nominations-compensations committees, directors financial expertise, tenures and multiple directorship etc. and as a bundle through creating a score of effectiveness on the earnings management practices. It also reviews on whether the managerial and family ownership can moderate the relationship between the factors of effectiveness of the board of directors (as a score) and the total executive compensation with the earnings management practices. Panel data analysis method will applied over the data collected for ASE for the Jordanian listed firms for the period after the issuing of the Jordanian corporate codes in 2009. This paper’s contributes to the existing literature by providing an in-depth review of corporate governance mechanisms and earning management.

scholarly journals THE RELATIONSHIP BETWEEN AUDIT COMMITTEE, POLITICAL INFLUENCE AND FINANCIAL REPORTING QUALITY: MALAYSIAN EVIDENCE

2019 ◽  
Vol 18 (2) ◽  
pp. 193
Author(s):  
AZIATUL WAZNAH GHAZALI ◽  
NUR AIMA SHAFIE
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Political Influence ◽  
Business Environment ◽  
Financial Reporting Quality ◽  
Pool Data ◽  
The Relationship

This paper examines the relationship between audit committee, political influence and financial reporting quality of Malaysian listed companies. This study uses pool data consisting of 3,255 firm-year observations listed on the Main Board of Bursa Malaysia from year 2010 to 2014. The findings are robust after controlling for the endogeneity. The current findings indicates that audit committee’s independence and the frequency of audit committee meetings are effective in controlling for both real earnings management and accounting misstatements. Nonetheless, in terms of audit committee size and audit committee’ audit expertise, the relationships are still insignificant. It is important to note that there is some improvement after the corporate governance reforms since studies prior to the reforms found audit committee’s variables are ineffective towards a higher quality of financial reporting. Meanwhile, political influence is still relevant in a Malaysian business environment with regard to financial reporting quality, however, the aggressiveness of the influence may have been diluted by the improvement of recent corporate governance reform.

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