Audit committee members’ proximity to corporate headquarters and audit fees

Firoozi, Maryam; Magnan, Michel

doi:10.1108/maj-05-2020-2684

Cited by 6 publications

(5 citation statements)

References 49 publications

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“…Therefore, the chair has a specific influence on the AC members and other parties involved in the reporting process. Previous studies document that some chairperson characteristics affect AC effectiveness, such as accounting and financial expertise (Schmidt and Wilkins, 2013), tenure (Nipper, 2021), managerial experience (Lisic, 2014), experiential and monitoring expertise (Ghafran and Yasmin, 2018), foreign origin (Firoozi and Magnan, 2022) and leadership ability (Compernolle and Richard, 2018; Khemakhem and Fontaine, 2019). In this section, we examine the potential influence of AC chair status on earnings management.…”

Section: Literature Review and Development Of Hypothesesmentioning

confidence: 99%

The desire of prestigious audit committee chairs: what are the benefits for financial reporting quality?

Broye

Johannes

2023

MAJ

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Purpose This study aims to examine how the prestige of audit committee (AC) chairpersons influences earnings management. Design/methodology/approach The sample contains 1,973 firm-year observations of French listed firms for the period 2007–2018. The authors examine the status of AC chairs and CEOs by focusing on the French business elite system. This study tests the association between AC chairs’ (relative) status and the level of earnings management using measures of accrual earnings management and real earnings management (REM). Findings The results of this study do not show that high-status AC chairs constrain accruals manipulation. However, the results provide evidence that they play a key role in constraining REM. High-status AC chairs are more likely to enhance the monitoring of this type of manipulation, given their thorough knowledge and understanding of the firm’s business environment and practices. This study also finds evidence that AC chairs with a status higher than CEOs are associated with lower levels of REM. The results suggest that prestigious AC chairs influence lower status CEOs’ strategic decisions. Originality/value This study demonstrates that high-status AC chairs play an important role in detecting and constraining deviations from normal business practices. The results have substantial implications for boards, which will benefit from an understanding of how the appointment of high-status chairs affects financial reporting quality.

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Section: Literature Review and Development Of Hypothesesmentioning

confidence: 99%

The desire of prestigious audit committee chairs: what are the benefits for financial reporting quality?

Broye

Johannes

2023

MAJ

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“…1 (Harber and Maroun, 2020) the auditor, overseeing the preparation of financial statements (Firoozi and Magnan, 2022), determining the auditors' fees (Al-Baidhani, 2016;European Union, 2006;Rani and Udi, 2009) and mediating disagreement between management and auditors (Oussii et al, 2019). For instance, Rani and Udi (2009) find that stronger audit committees demand a higher level of assurance and are less likely to dismiss their auditors.…”

Section: Does Trustmentioning

confidence: 99%

“…Internally, the audit committee chair acts as a bridge, which streamlines communication between the board of directors and auditor (He et al , 2017). Externally, the audit committee chair is responsible for appointing and dismissing (Harber and Maroun, 2020) the auditor, overseeing the preparation of financial statements (Firoozi and Magnan, 2022), determining the auditors’ fees (Al-Baidhani, 2016; European Union, 2006; Rani and Udi, 2009) and mediating disagreement between management and auditors (Oussii et al , 2019). For instance, Rani and Udi (2009) find that stronger audit committees demand a higher level of assurance and are less likely to dismiss their auditors.…”

Section: Introductionmentioning

confidence: 99%

“…The quality of their interactions is commonly considered an indicator of the level of audit quality (International Auditing and Assurance Standards Board, 2014; Public Company Accounting Oversight Board (PCAOB), 2012). Different topics are expected to be communicated between the audit committee chair and auditor (Firoozi and Magnan, 2022). In the external audit, the audit committee requires information as they normally do not participate in routine organizational activities.…”

Section: Introductionmentioning

confidence: 99%

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Does trust matter in external audits? The role of audit committee chair’s trust in external audits

Cheung,

Lai

2023

MAJ

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Purpose This study aims to investigate the impact of the audit committee chair’s trust on the quality of interactions between the external auditor and the audit committee chair in Hong Kong. Design/methodology/approach The research uses a questionnaire survey to gather data from the audit committee chairs of the listed companies in Hong Kong, with a response rate of 19.2%. Partial least squares structural equation modelling is used in this study. Findings The results reveal that the audit committee chair’s trust in the external auditor’s competence, integrity and goodwill is an important determinant of the interaction quality. The findings also show that interaction quality during the pre-engagement stage is important to mediate the relationships between the three dimensions of trust and interaction quality during the audit performance stage. Originality/value This is the first study, to the best of the author’s knowledge, that examines the impact of the audit committee chair’s trust in the external auditor on the quality of their interactions. The findings provide insights for board of directors, auditors and policymakers to implement policies that enhance trust between them to improve audit quality.

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“…Moreover, existing studies on inquiry letters mostly concentrate on the Securities and Exchange Commission (SEC) comment letters (Schantl & Wagenhofer, 2021;Skomra et al, 2022), whereas research on audit fees mostly focuses on developed countries such as the United States, England, Canada, and Sweden (Sellami & Chérif, 2020;Chang et al, 2021;Firoozi & Magnan, 2022;Xue & O'Sullivan, 2023;Costa & Habib, 2023), leaving insufficient research on developing countries such as China. As China moves into a new stage of development and increasingly takes its place on the world stage, facing complex and diverse capital markets, 'Relaxing controls and strengthening regulation' is the core idea of comprehensive deepening reform of Chinaʹs capital markets.…”

Section: Introductionmentioning

confidence: 99%

Annual report inquiry letters, disclosure of key audit matters and audit fees: Evidence from Chinese A-share listed companies

Li,

Gou,

Wang

2023

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Research background: Issuing an annual report inquiry letter is a powerful means by which securities exchanges regulate the information of listed companies, which can convey information, reveal risks, and sustain the orderly development of capital markets. However, research on the economic consequences is limited. Purpose of the article: This study analyses the relationships and mechanisms between annual report inquiry letters, key audit matters (KAMs), and audit fees. Methods: We collected data from Chinese A-share companies listed on the Shanghai and Shenzhen Stock Exchanges between 2017 and 2022, totalling 9,903 observations. We used Stata to conduct mediation effects and heterogeneity tests on the data. We also conducted further research on the relationship between audit fees and the purchase of audit opinions. Findings & value added: The results indicate that (1) companies that receive annual report inquiry letters have higher audit fees. Furthermore, (2) companies that receive annual report inquiry letters are more likely to increase the number of disclosed KAMs, leading to higher audit fees. Finally, (3) the above relationship is more significant amongst companies audited by non-Big-Four accounting firms than amongst those audited by Big-Four accounting firms. Further, the increase in audit fees for the sample companies is not due to the purchase of audit opinions and is combined with robustness tests, further validating the conclusions of this study. These findings contribute to research on the economic impact of implementing the annual report inquiry system and new auditing standards, providing empirical evidence for the effectiveness of government oversight of capital markets.

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Audit committee members’ proximity to corporate headquarters and audit fees

Cited by 6 publications

References 49 publications

The desire of prestigious audit committee chairs: what are the benefits for financial reporting quality?

The desire of prestigious audit committee chairs: what are the benefits for financial reporting quality?

Does trust matter in external audits? The role of audit committee chair’s trust in external audits

Annual report inquiry letters, disclosure of key audit matters and audit fees: Evidence from Chinese A-share listed companies

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