Does the Corporate Governance Status and Its Changes Affect the Auditor’s Major Misstatement Risk Judgment?

Two-tier board characteristics and expanded audit reporting: Evidence from China

“…Consistent with this view, Feng et al (2020) find that the independence of the board of directors within a two-tier board structure increases monitoring function and, thus, is negatively associated with the fraud. Fakhfakh and Jarboui (2022) indicate that boards with more independent directors are associated with lower audit risk.…”

“…In terms of the two-tier board structure, Feng et al (2020) find that a larger board of directors is negatively associated with fraud. Fakhfakh and Jarboui (2022) suggest that the size of the board of directors is negatively related to audit risk.…”

“…The literature shows that the CEO's duality results in less effective monitoring and increases firm risk (Bliss et al 2007;Feng et al 2020). By studying the relationship between the two-tier board structure and earnings management, Lin et al (2016) find that CEO duality is negatively related to informative earnings management.…”

“…Prior research (e.g., Fakhfakh and Jarboui 2022;Feng et al 2020) indicates that the characteristics of corporate governance can be linked to auditors' assessment of risk and their reporting behavior. In general, there are two main board structures in corporate governance: the one-tier (unitary) board structure and the two-tier (dual) board structure (Firth et al 2007;Cho and Rui 2009).…”

“…Prior research (e.g., Cohen et al 2002;Firth et al 2007;Feng et al 2020) suggests that the strength of corporate governance (through providing strong monitoring, controlling operations effectively, and thus minimizing client risk) impacts external auditing. As highlighted by ISA 701, the auditor is expected to communicate with those who are responsible for corporate governance (e.g., the board of directors and supervisory board) while defining the scope and the number of KAMs (Lin et al 2020).…”