Board monitoring and audit fees: the moderating role of CEO/chair dual roles

Abstract

Purpose This paper aims to examine whether CEO/chair dual roles influence board monitoring-audit fees nexus. The impact of corporate governance on audit fees literature is lacking in the banking sector, which is subject to different regulations and reporting requirements to other sectors. The level and quality of external audit services are important not only to shareholders and customers but also for regulators’ reputations and public confidence. Design/methodology/approach Examining a sample of the US national commercial banks, this study fills the gap by empirically examining whether the attributes of internal corporate governance mechanisms, proxied by boards of directors and audit committee characteristics, are related to audit fees. We introduce two interaction variables to understand whether chief executive officer (CEO)/chair dual roles influence the relationships between board independence and audit fees on the one hand and between the audit committee and audit fees on the other hand. Findings We find that audit fees are positively associated with board independence, board size, CEO/chair dual role and audit committee financial experts. The results of the interaction variables indicate that boards with higher independence and more effective audit committees tend to demand higher audit quality, and consequently, pay higher audit fees to protect shareholders’ interests from potential power abuse by CEOs who also chair boards. Originality/value This study contributes to the literature by providing extensive understanding of the influence on audit fees of the independence of the board of directors and the effectiveness of the audit committees. The authors first examine the impact of each individual governance variable separately and then introduce two interaction variables. This study provides policymakers with insights into the existing relationships between audit fees and the banking sector governance structure.

Pengaruh Corporate Governance Terhadap Luas Pengungkapan Integrated Reporting dan Implikasinya terhadap Nilai Perusahaan

“…Hasil temuan ini sejalan dengan penelitian Haji & Anifowose (2016) yang menyatakan bahwa keahlian komite audit tidak berpengaruh terhadap praktik IR. Kontradiksi dengan hasil temuan Haji & Anifowose (2016), Haji (2015) menunjukkan terdapat hubungan positif signifikan antara keahlian komite audit dengan voluntary disclosure, yaitu pengungkapan intellectual capital. Selain itu, Chariri & Januarti (2017) juga menyatakan bahwa keahlian komite audit berpengaruh positif terhadap luas lingkup IR.…”

“…Hasil penelitian ini konsisten dengan penelitian Haji (2015) yang menemukan bahwa komite audit yang melakukan pertemuan rutin berpengaruh positif signifikan terhadap voluntary disclosure, yaitu pengungkapan intellectual capital. Haji & Anifowose (2016) dan Chariri & Januarti (2017) juga menemukan bahwa semakin sering komite audit melakukan pertemuan rutin, maka semakin tinggi luas pengungkapan IR. Pertemuan komite audit selama periode 2017 dan 2018 ratarata sebanyak 7 kali per tahun.…”

“…Hal tersebut menunjukkan bahwa semakin banyak anggota komite audit yang memiliki keahlian di bidang keuangan dan/atau akuntansi akan semakin banyak informasi mengenai IR yang disajikan dalam AR perusahaan. Namun, hasil penelitian yang dilakukan oleh Haji & Anifowose (2016) menemukan bahwa tidak terdapat hubungan yang signifikan antara independensi dan keahlian keuangan komite audit terhadap praktik IR. H2:…”

“…Berdasarkan hasil penelitian oleh Haji (2015), pertemuan rutin komite audit berpengaruh positif signifikan terhadap pengungkapan intellectual capital. Kemudian hasil penelitian oleh Haji & Anifowose (2016) menunjukkan bahwa pertemuan komite audit memiliki hubungan positif signifikan dengan tingkat dan kualitas praktik IR. Hasil penelitian tersebut didukung oleh penelitian Chariri & Januarti (2017), frekuensi pertemuan komite audit mempengaruhi IR yang disajikan dalam AR perusahaan.…”

Corporate Governance and Auditor Choice in Kuwait

“…Agency theory advocates (e.g., Jensen, 1993) suggest a positive relation between board size and board's monitoring capabilities. Likewise, the audit fees literature includes several studies (e.g., Karim et al 2015: Jizi andNehme, 2018) showing a positive association between board size and external audit fees, suggesting that larger boards of directors tend to demand greater assurance levels (i.e., more external audit work) from external auditors Audit and CG research (e.g., Hay et al 2006;Beisland et al 2015;Ntim et al 2015a) suggests that the effectiveness of CG and controls within firms is considerably linked to board size. There are diverse views, however, on how governance and control processes are influenced by board size.…”