Legal Expertise on Corporate Audit Committees and Financial Reporting Quality

Krishnan, Jayanthi; Wen, Yuan; Zhao, Wanli

doi:10.2308/accr-10135

Cited by 291 publications

(198 citation statements)

References 48 publications

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“…In this study, financial reporting quality forms the dependent variable. We use two proxies: accruals quality ( AQ ) and absolute discretionary accruals ( ADACC ) to measure this variable (Ashbaugh‐Skaife, Collins, Kinney, & LaFond, ; Doyle, Ge, & McVay, ; Krishnan, Wen, & Zhao, ). We use in the first proxy the Dechow and Dichev () model as modified by Francis, LaFond, Olsson, and Schipper () and we regress current accruals ( TCA ) on operating cash flows in the current year ( CFO t ), the preceding year ( CFO t −1 ), and the following year ( CFO t+ 1 ), changes in revenues (Δ REV ), and gross property, plant, and equipment ( PPE ):

{TCA}_{i, t} = α_{0, i} + β_{1, i} {CFO}_{i, t - 1} + β_{2, i} {CFO}_{i, t} + β_{3, i} {CFO}_{i, t + 1} + β_{4, i} normalΔ {REV}_{i, t} + β_{5, i} {PPE}_{i, t} + ν_{it}

…”

Section: Research Design and Methodologymentioning

confidence: 99%

Effective association between audit committees and the internal audit function and its impact on financial reporting quality: Empirical evidence from Omani listed firms

et al. 2018

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The role of the audit committee in oversight of the internal control and internal audit function has grown in the last decades as corporate governance mechanisms after the dramatic scandals and failures. This paper examines the impact of the audit committee and the presence of internal audit function on a company's financial reporting quality. Moreover, this study focus on the association between the audit committee and internal audit function and company's financial reporting quality measured as accruals quality and absolute discretionary accruals. It is hypothesized that the financial reporting quality is related to the strength of internal corporate governance mechanisms, including audit committee and internal audit and its association. Different mechanisms are being examined: audit committee size and independence, frequency of meeting, financial literacy, existence of internal audit function and its meeting independently. To test our hypothesis, we employ panel data analysis for 71 nonfinancial firms through 139 observations listed on the Muscat Securities Market during the period of 2013 and 2014. The data used in the analysis were collected from the companies' annual reports published by the Muscat Securities Market. Ordinary least squares is used to regress financial reporting quality linear variables on audit committee and internal audit. The findings suggest that audit committee meetings frequency and the presence of internal audit function positively affect a company's financial reporting quality. Hence, an audit committee that meets more frequently provides effective monitoring of financial reporting and increases the likelihood of discussing and following up any problems and findings in the financial statements and audit reports. Thus, frequent audit committee meetings provide better oversight of the annual accounts. Likewise, the internal audit function is considered an important corporate governance mechanism to safeguard the quality of financial reporting by monitoring organizational risks, assessing internal controls and detecting possible manipulation because the internal auditor evaluates financial procedures. However, results suggest that the relationship between other corporate governance mechanisms and financial reporting quality is not significant.

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{TCA}_{i, t} = α_{0, i} + β_{1, i} {CFO}_{i, t - 1} + β_{2, i} {CFO}_{i, t} + β_{3, i} {CFO}_{i, t + 1} + β_{4, i} normalΔ {REV}_{i, t} + β_{5, i} {PPE}_{i, t} + ν_{it}

…”

Section: Research Design and Methodologymentioning

confidence: 99%

Effective association between audit committees and the internal audit function and its impact on financial reporting quality: Empirical evidence from Omani listed firms

et al. 2018

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“…We address these issues of endogeneity, specifically for audit committee chair experiential and monitoring expertise and audit report lag period, by employing an instrumental variable approach; that is, two-stage least squares (Whisenant, Sankaraguruswamy, & Raghunandan, 2003;Krishnan, Wen, & Zhao, 2011). Our first instrumental variable is the number of audit committee chairs with accounting expertise.…”

Section: Alternative Variables and Testsmentioning

confidence: 99%

Audit committee chair and financial reporting timeliness: A focus on financial, experiential and monitoring expertise

2017

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In this study, we examine the association of audit committee chair financial, experiential and monitoring expertise with the audit report lag period. We find that the experiential and monitoring expertise of audit committee chairs have a significant negative association with the delay in the audit report lag period, possibly resulting in more effective audit committee chairs, at least in the face of financial reporting timeliness. We also find that the audit committee composite compliance variable has a significant negative association with the audit report lag period, which suggests that a firm's compliance with audit committee regulations is also beneficial for financial reporting timeliness. These are important findings from the practice, academic and public policy perspectives.

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“…The expertise of audit committee member had a positive association with financial reporting quality (Krishnan et al, 2011). With audit committee, transparency and corporate accountability monitored properly.…”

Section: Introductionmentioning

confidence: 96%

The Effect of Good Corporate Governance and Environmental Performance on Financial Performance of the Proper Listed Company on Indonesia Stock Exchange

Andriana¹,

Panggabean²

2017

Binus Business Review

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This research aimed to determine whether the environmental performance and Good Corporate Governance (GCG) mechanisms, such as managerial ownership, institutional ownership, the proportion of independent commissioners had effects of the audit committee on measured financial performance by using Return on Equity (ROE). This research population was manufacturing company listed on Indonesia Stock Exchange that participated in PROPER 2012PROPER /2013PROPER and 2013PROPER /2014. Based on the multiple regression analysis, audit committee partially had a significant effect on financial performance, while the others did not. Meanwhile, the analysis result shows that environmental performance and all GCG mechanisms simultaneously have significant effects on financial performance.

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Legal Expertise on Corporate Audit Committees and Financial Reporting Quality

Cited by 291 publications

References 48 publications

Effective association between audit committees and the internal audit function and its impact on financial reporting quality: Empirical evidence from Omani listed firms

Effective association between audit committees and the internal audit function and its impact on financial reporting quality: Empirical evidence from Omani listed firms

Audit committee chair and financial reporting timeliness: A focus on financial, experiential and monitoring expertise

The Effect of Good Corporate Governance and Environmental Performance on Financial Performance of the Proper Listed Company on Indonesia Stock Exchange

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