No abstract

Purpose The purpose of this paper is to examine the effects of self-efficacy, goal orientation and task complexity on audit judgement performance in correctly linking audit procedures to audit objectives and types of misstatements. Design/methodology/approach The authors conducted an experiment audit with 154 auditors from small and medium audit firms in Malaysia as participants. The experimental task required them to link audit procedures to audit objectives and types of misstatements. Findings For sample of auditors from small and medium audit firms in Malaysia, the authors found that learning goal orientation has a stronger effect on audit judgement performance than performance-approach and performance-avoidance goal orientations. Self-efficacy mediates the effect of goal orientation when an audit task is less complex compared to when the task is more complex. Research limitations/implications These results highlight the importance of social cognitive factors in explaining variations in audit judgement performance for audit judgement tasks with different levels of complexity. Originality/value The incorporation of individual psychological differences as explanatory variables in audit judgement studies may lead to a better understanding of auditors’ judgement and decision-making processes in small and medium audit firms located in developing economies.

Purpose -Conflicts between managers and outside auditors may exist in choosing alternative accounting procedures. Since auditors are appointed by the firm, they are subject to dismissal if divergent opinions cannot be resolved. To a lesser extent, financial reports are often negotiated. In order to produce unbiased financial reports, audit committee members are appointed to act independently in order to resolve conflicts between the managers and outside auditors. This study aims to assess the effectiveness of some audit committee characteristics, i.e. the independence of members, size, frequency of meeting and knowledge of the members, to monitor management behavior with respect to their incentives to manage earnings. Design/methodology/approach -This paper uses discretionary accruals obtained from the established model as a signal of the presence of earnings management. Findings -The evidence shows that the presence of a fully independent audit committee reduces earnings management practices. It was also found that firms which had more knowledgeable audit committee members and held more audit committee meetings recorded fewer earnings management practices compared with other firms. Originality/value -This paper is different from prior studies, in that it makes a significant contribution towards enhancing one's knowledge in the interacting role of audit committee characteristics.

No abstract

Purpose This paper aims to explore how the presence of an audit committee is associated with other corporate governance mechanisms, i.e. board structure, ownership structure and quality of external audit. The present study evaluated whether the presence of the audit committee complements or substitutes other governance mechanisms in Palestinian companies. Moreover, the effect of investment opportunities on the relationship between the formation of the audit committee and the quality of the auditor was addressed. Design/methodology/approach The association between the formation of the audit committee and other governance variables was modelled as a binary logistic model. The sample comprising 44 firms listed on Palestine exchange for the period between 2013 and 2017, amounting to 220 firm-year observations. Findings Based on the investigation, the results have indicated that board independence, the distinction between the chairman and chief executive officer function, ownership concentration and audit quality enhance the chance of audit committee formation, implying complementary effect. Contrastingly, board size and board ownership serve as a substitute to audit committee formation. It has also been found that investment opportunities act as an effective moderating factor that strengthens the relationship between audit quality and the formation of the audit committee. Originality/value The study provides valuable insight into the interaction between multiple corporate governance mechanisms within the economy of Palestine where the external uncertainty is high and investment opportunities are constrained by the decisions of the occupying authority. The findings may help regulators and policymakers in Palestine alongside those of other countries with similar environmental features to revise and update their corporate governance codes to ensure that the best control can be achieved, subsequently attracting more foreign and domestic investments.