The Impact of Audit Committee Performance and Composition on Financial Reporting Quality in Jordan

Abstract

The corporate governance literature indicates efforts to investigate the role of the audit committee (AC) in improving the financial reporting quality (FRQ) after the emergence of financial scandals in many countries in the world, inclusive Jordan. To date, empirical findings are inconclusive enough to address all audit committee characteristics regarding its competency and responsibilities by employing a questionnaire to collect data about this relationship. Thus, this study measures the correlation between AC (performance and composition) and FRQ of manufacturing corporations registered on the Amman Stock Exchange (ASE). To test this impact empirically, the target population was financial managers, audit committee members, and internal audit managers who are working in manufacturing corporations listed on the (ASE). According to the coefficient (β), the independent variables (Audit Committee Performance and Audit Committee Composition influence the dependent variable FRQ. This research recommends that firms enhance the audit committee work performance and composition to ensure audit committee members effectively enhance the FRQ audit committee is a vital mechanism of the firm's corporate governance system.

The Impact of Audit Committee Composition and Performance on Financial Reporting Quality in Kurdistan’s Industrial Companies

“…Additionally, empirical studies support the application of regression analysis citing that it shows the relationship between two or more variables (Ngo & La Puente, 2012) and provides details of the magnitude of the impact of the independent variables on the dependent variable (Uyanik & Güler, 2013). The application of such an approach represented the study's novelty as the findings are tailored for such a country and come when other studies are focusing on developed economies like Jordan (Alawaqleh & Almasria, 2021), Malaysia (Hasan, Kassim & Hamid, 2020), and Nigeria (Kantudu & Samaila, 2015).…”

“…A questionnaire was used in collecting the required data and the questionnaire was developed using related empirical studies (Alawaqleh & Almasria, 2021;Hasan, Kassim & Hamid, 2020;Kantudu & Samaila, 2015). However, the questionnaire was modified to enhance its validity and reliability in answering the proposed research questions.…”

“…Other studies highlight issues like poor organisational performance (Khan, 2021;Alqatamin, R. M. 2018;Shatnawi, Hanifah, Adaa & Eldaia, 2019), negative image and reputation (Cao, Myers & Omer, 2012) and poor corporate governance practices (Habib & Jiang, 2015) are challenges posed by the failure to warrant high-quality financial reporting. Though some studies advocated for changes in audit committee compositions (Alawaqleh & Almasria, 2021), and improvements in audit performance (Alkilani & Hussin, 2019;Shatnawi & Eldaia, 2019), little has been done to explore such suggestions. The researchers observed similar issues in Kurdistan and hence, attempt to explore further the impact of audit committee composition and audit committee performance on financial reporting quality in industrial companies.…”

Corporate Governance and Risk Management: A Bibliometric Mapping for Future Research Agenda

“…However, there is still much scope in this domain, considering the growing concern for the environment and climate change. In addition, the topic of ‘audit committee’ has also been explored in recent years to determine its impact on firm performance (Al-ahdal & Hashim, 2021) and financial reporting (Alawaqleh & Almasria, 2021).…”

Impact of Audit Failures and Internal Control on Performance of Public Companies in Oman

“…A severe distortion of the financial statements that is not depicted in the audit report and a serious error by the auditor during the auditing process are both considered audit failures [22]. When information in a financial report is discovered to be inaccurate, this may provide a difficult scenario for a firm in addition to its regulator and auditors, leading to insolvency as well as legal action [4], the 2002 Sarbanes-Oxley Act (SOX). These and other accounting crises are commonly cited as instances of "audit failure," which is defined as a situation where an auditor fails to.…”