Audit quality and classification shifting: evidence from UK and Germany

Usman, Muhammad; Nwachukwu, Jacinta C.; Ezeani, Ernest; Salem, Rami Ibrahim A.; Bilal, Bilal; Kwabi, Frank

doi:10.1108/jaar-11-2022-0309

Cited by 5 publications

(1 citation statement)

References 116 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…To begin with, it is worth noting that the UK possesses a well-established regulatory system, exemplified by the UK Corporate Governance Code. This code serves as a comprehensive guideline, outlining the expected norms and practices that listed firms should adhere to (Salem et al, 2023a;Previtali and Cerchiello, 2023;Ezeani et al, 2021;Ezeani et al, 2023a;Usman et al, 2023;Komal et al, 2023). The analysis of how A-CD practices correspond with these regulatory criteria offers useful insights into the efficacy of current governance systems and policy implementations.…”

Section: Introductionmentioning

confidence: 99%

Anti-corruption disclosure and corporate governance mechanisms: insights from FTSE 100

Ghazwani,

Alamir,

Salem

et al. 2023

IJAIM

View full text Add to dashboard Cite

Purpose This study aims to examine the impact of corporate governance (CG) on anti-corruption disclosure (A-CD), paying particular attention to the FTSE 100. Notably, it examines how board and audit committees’ characteristics affect the quantity and quality of anti-corruption disclosure. Design/methodology/approach Data from FTSE 100 firms, spanning the period from 2014 to 2020, were analysed using the regression of the Poisson fixed effect and GEE analyses. Findings The findings show that gender diversity, audit committee expertise and the independence of the audit committee are positively associated with both quantity and quality of anti-corruption disclosure. Notably, no statistically significant relationships were identified between anti-corruption disclosure and factors such as board size, role duality or board meetings. Research limitations/implications The findings provide valuable insights for decision-makers and regulatory bodies, shedding light on the elements that compel UK companies to enhance their anti-corruption disclosure and governance protocols to alleviate corruption and propel efforts towards ethical behaviour. Originality/value This study makes a notable contribution to the sparse body of evidence by examining the influence of board and audit committee attributes on anti-corruption disclosure subsequent to the implementation of the UK Bribery Act in 2010. Specifically, to the best of the authors’ knowledge, this study assesses for the first time the impact of board and audit committee mechanisms on both the quantity and quality of anti-corruption disclosure.

show abstract

Section: Introductionmentioning

confidence: 99%

Anti-corruption disclosure and corporate governance mechanisms: insights from FTSE 100

Ghazwani,

Alamir,

Salem

et al. 2023

IJAIM

View full text Add to dashboard Cite

show abstract

Do the educational profile, gender, and professional experience of audit committee financial experts improve financial reporting quality?

Bilal,

Komal,

Ezeani

et al. 2023

Journal of International Accounting, Auditing and Taxation

View full text Add to dashboard Cite

The effect of non-audit fees on interest payments classification shifting: does internal governance and firm financial well-being matter?

Hessian,

Zalata,

Hussainey

2024

JAAR

View full text Add to dashboard Cite

PurposeThis study examines the effect of non-audit fees (NAF) provisions on interest payments classification shifting. In addition, we investigate to what extent the NAF economic bonding and interest payments classification shifting is contingent on internal governance and firm financial well-being.Design/methodology/approachThis study employed probit regression using a sample of UK non-financial firms indexed in FT UK (500) over the period from 2009 to 2017.FindingsWe find evidence that the economic bonding of NAF between external auditors and their clients is more likely to encourage managers in UK firms to manipulate operating cash flows through interest payment classification shifting. In addition, and interestingly, our results evince that classification-shifting may be the less costly and soft choice of managers in firms with strong governance and charging higher NAF. Furthermore, we show that financially distressed firms associated with their auditors in purchasing non-audit services are more prone to attempting to manipulate and engage in interest payments classification-shifting. Our result did not provide a significant effect of external auditor tenure on the interest payments classification shifting.Research limitations/implicationsOur findings are subject to the following limitations: First, this study uses a composite index to measure the quality of internal corporate governance. It focuses only on the board of directors, but this index does not reflect other internal governance mechanisms. Second, this study is subject to limited study time due to the implementation of key IFRS standards (IFRS 9 Financial Instruments and IFRS 15 Revenue from Contract with Customers) from 2018–2019.Practical implicationsThis study was motivated by the UK’s Financial Reporting Council regulators' pressure on the Big 4 audit firms to move more audit time into main auditing activities, reduce cross-selling to audit clients and separate their audit practices by 2024. Overall, we provide new evidence that directs a close spotlight on the threats of NAF that are potentially useful to regulators, shareholders and investors.Originality/valueIt is motivated by the UK’s Financial Reporting Council regulators' pressure on the Big 4 to move more audit firm time into main auditing activities, reduce cross-selling to audit clients and separate their audit practices by 2024. Overall, we provide new evidence that directs a close spotlight on the threats of NAS that are potentially useful to regulators, shareholders and investors.

show abstract

Audit quality and classification shifting: evidence from UK and Germany

Cited by 5 publications

References 116 publications

Anti-corruption disclosure and corporate governance mechanisms: insights from FTSE 100

Anti-corruption disclosure and corporate governance mechanisms: insights from FTSE 100

Do the educational profile, gender, and professional experience of audit committee financial experts improve financial reporting quality?

The effect of non-audit fees on interest payments classification shifting: does internal governance and firm financial well-being matter?

Contact Info

Product

Resources

About