The influence of corporate governance mechanisms on the quality of financial reporting and auditing: Perceptions of auditors and directors in Singapore

Abstract

This study uses two hypothetical cases to examine the perceptions of auditors and directors in Singapore about corporate governance practices relating to the quality of financial reporting and auditing. In the first case, the strength of the audit committee, the existence of an internal audit function and the strength of a corporate code of conduct were manipulated. All three variables were perceived to have some influence on financial reporting and audit quality. However, some interesting differences were found between the perceptions of auditors and directors. Auditors place more weight on the internal audit function, possibly due to their familiarity with the role that internal audit can play in reducing audit risk and enhancing controls. Directors have more confidence in board enforcement of a strong code of conduct, possibly reflecting the view that this encourages staff to adhere to higher ethical standards. In the second case, audit partner rotation, outsourcing of internal audit services and whether the audit firm audited all companies within a group were manipulated. Auditors believed that their ability to resist management pressure was enhanced when they audited all companies within the group. No significant differences were found for the other variables, suggesting that neither group believes that these practices impair audit independence.

Does Corporate Governance Matter? Evidence from Accounting Conservatism Practices among Jordanian Listed Companies

“… Audit Committee: was computed by the presence of audit committee in the firm, coded 1 if there is an audit committee in the firm and coded 0 otherwise (Goodwin &Seow, 2002;Gulzar& Wang, 2011).…”

Disclosure Quality on Governance Issues in Annual Reports of Malaysian PLCs

“…According to Goodwin and Seow (2002) the Cadbury report published in 1992 recommended that the board of directors of a company should have a separate committee for overseeing the remuneration of executive directors and the auditing of the financial reporting. In other words, companies should have separate AC and remuneration committees.…”

“…The same requirement is found under the Bursa listing requirements. Goodwin andSeow (2002), andBeasley et al (2000) found that investors, auditors and directors believe that a strong and effective AC is able to assist external auditors in auditing the fraudulent accounting records and increase the level of quality disclosure. Ho and Wong (2001) found that companies, which have an AC, are more likely to have a higher extent of voluntary disclosure.…”

Corporate fraud culture: Re‐examining the corporate governance and performance relation

“…Studies have identified various triggers that encourage the occurrence of corporate fraud, such as external pressures on management to perform, opportunities for executives to deceive stakeholders and the absence of effective oversight (Goodwin and Seow, 2002;Graycar and Smith, 2002;Birchfield, 2004;and Davidson et al, 2005). A corollary of the corporate fraud and governance relation is that firms that have a high risk of corporate fraud react differently to improvements in governance than firms that are at low risk of fraud.…”