Audit committee activity and agency costs

Collier, P.; Gregory, Alan

doi:10.1016/s0278-4254(99)00015-0

Cited by 192 publications

(189 citation statements)

References 18 publications

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“…Specifically, the increase in size, the type of auditor (leader or not), the auditor tenure and the presence of large sharesholders exert a significant and positive influence on the disappearance of avoidable qualifications. This is also in accordance with the findings of previous studies on Anglo-Saxon companies, such as Menon and Williams (1994), Deli and Gillan (2000) and Klein (2002a) for the case of size, and Collier and Gregory (1999) for the case of the type of auditor. Some of these studies (Deli and Gillan 2000;Collier and Gregory 1999) found that the effect of firm leverage is significant, whereas we do not find such an effect.…”

Section: Resultssupporting

confidence: 92%

“…The majority of these studies, mainly of Anglo-Saxon origin, investigate the different factors which affect the efficacy of ACs and usually focus their analysis on listed companies. Different approaches have been used to study AC efficacy, including: (a) linking the ACs considered to be effective with certain corporate characteristics (Menon and Williams 1994;Collier and Gregory 1999;Deli and Gillan 2000;Klein 2002b); (b) determining the most important functions performed by the AC or what features should it have (Kalbers 1992;Kalbers and Fogarty 1993); (c) investigating the relation between the work of the AC and the auditor (Knapp 1987;Abbott and Parker 2000;Raghunandan 2001;Dezoort et al 2003; assessing whether the presence of an AC affects the reliability of financial reporting (Mcmullen 1996;Lin et al 2006;Jaggi and Leung 2007) as well as the extent of voluntary information released by the company (Ho and Wong 2001 and (e) examining whether the specific characteristics of an AC affect its efficacy.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

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The effectiveness of the audit committee in Spain: implications of its existence on the auditor’s opinion

Suárez

García

Méndez

et al. 2012

SERIEs

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This research work is aimed at determining the effectiveness of the Audit Committee (AC), analyzing its impact on the reliability of accounting information issued by spanish listed companies. With this aim, we study whether certain features such as its voluntary or otherwise compulsory formation, its independence and activity lead to an improvement of financial reporting quality, which is defined as the removal of avoidable qualifications in the audit report. We considered the periods where ACs were voluntary (1998-2002) and compulsory (2003 onwards). The results obtained suggest that: (a) compulsory ACs are more effective than voluntary ones; (b) ACs with a higher proportion of independent members do not lead to greater improvements in the quality of accounting information; and (c) the number of meetings of the AC is directly related to improvements in the quality of accounting information.

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Section: Resultssupporting

confidence: 92%

Section: Literature Review and Hypothesesmentioning

confidence: 99%

The effectiveness of the audit committee in Spain: implications of its existence on the auditor’s opinion

Suárez

García

Méndez

et al. 2012

SERIEs

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“…Agency costs are expected to be higher when senior management's shareholdings are proportionately lower because this results in less alignment of shareholder and management interests (Ettredge et al, 1994;Menon and Williams, 1994). They are also expected to be higher when there is a smaller concentration of large shareholders as these shareholders can more directly monitor the activities of management (Collier and Gregory, 1999). A higher level of debt increases agency costs (Watts and Zimmerman, 1986;Chow, 1982;Jensen and Meckling, 1976) because of the incentives for managers to transfer wealth from debtholders to shareholders (Klein, 2002;Ettredge et al, 1994;Bradbury, 1990).…”

Section: Control Variablesmentioning

confidence: 99%

The use of internal audit by Australian companies

Goodwin-Stewart

Kent

2006

Managerial Auditing Journal

169

205

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Purpose -The purpose of this study is to explore the voluntary use of internal audit by Australian publicly listed companies and to identify factors that lead listed companies to have an internal audit function. Design/methodology/approach -Drawing on the Institute of Internal Auditors' definition of internal auditing, the paper predicts that internal audit use is associated with factors related to risk management, strong internal controls and strong corporate governance. To test the predictions, the study combines data from a survey of listed companies with information from corporate annual reports. The paper also provides descriptive information on the use of internal audit. Findings -The results indicate that only one-third of the sample companies use internal audit. While size appears to be the dominant driver, there is also a strong association between internal audit and the level of commitment to risk management. However, the study finds only weak support for an association between the use of internal audit and strong corporate governance. Research limitations/implications -A limitation of our study is that some of the variables in the model may not be good proxies for the factors being measured. Refinement of the model and the variables used provides an opportunity for future research. Practical implications -The limited use of internal audit by Australian companies has important implications for sound corporate governance. Originality/value -This is the first study that identifies factors associated with the use of internal audit by Australian listed companies.

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“…Consistent with agency theory and the monitoring of firms, prior studies have found a relationship between high quality auditing firms, leverage and audit committee activity (Collier & Gregory, 1999). In this study it is a dummy variable taken as 1 if the accounting firm used is a high quality "Big Six" international auditing firm.…”

Section: Auditing Firmmentioning

confidence: 72%

Leverage, Profitability and the Ownership Structures of Listed Firms in China

Hovey

2007

SSRN Journal

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The relationship between leverage, profitability and a firm's ownership structure in China is investigated in this paper. It is an exploratory study based on all firms listed on the Shanghai and Shenzhen stock exchanges from 1999 to 2005. The results of the empirical analysis are reported in this paper.The most significant result is that foreign holdings are found to have a significant relationship with the leverage of listed firms in China. Whereas, somewhat unexpectedly, institutional ownership, through legal person holding companies, state ownership and private holdings are not found to have a significant relationship with the capital structure choices of firms in China. The results also suggest that some firm-specific factors that are relevant for explaining firm leverage generally referred to in studies in developed economies, such as profitability, growth opportunities, size and tax shields, are also relevant in China. The age of the firms and the industry t o which they principally belong also has significant bearing. Yet direct government grants and the use of an internationally renowned auditing firm do not show a significant relationship.

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Audit committee activity and agency costs

Cited by 192 publications

References 18 publications

The effectiveness of the audit committee in Spain: implications of its existence on the auditor’s opinion

The effectiveness of the audit committee in Spain: implications of its existence on the auditor’s opinion

The use of internal audit by Australian companies

Leverage, Profitability and the Ownership Structures of Listed Firms in China

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