Auditing, directorships and the demand for monitoring

Anderson, Don; Francis, Jere R.; Stokes, Donald J.

doi:10.1016/0278-4254(93)90014-3

Cited by 186 publications

(160 citation statements)

References 20 publications

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“…Cohen et al (2004) describe the complex interactions between these governance mechanisms as the "corporate governance mosaic" (p. 88). Anderson et al (1993) argue that internal audit is a substitute mechanism for monitoring by directors. However, information asymmetry problems between executive and independent directors suggest that internal audit is more likely to be a complementary mechanism.…”

Section: Internal Audit As a Control Mechanismmentioning

confidence: 99%

“…A higher level of debt increases agency costs (Watts and Zimmerman, 1986;Chow, 1982;Jensen and Meckling, 1976) because of the incentives for managers to transfer wealth from debtholders to shareholders (Klein, 2002;Ettredge et al, 1994;Bradbury, 1990). Further, a high level of growth opportunities has been argued to increase agency costs of debt because wealth transfers between shareholders and debtholders are more difficult when firms have a greater proportion of assets-in-place (Collier, 1993;Anderson et al, 1993). This is because assets-in-place are more likely to be used in debt covenants to restrict opportunistic behaviour by management on behalf of shareholders (Anderson et al, 1993).…”

Section: Control Variablesmentioning

confidence: 99%

“…First, the total amount of potential wealth transfer from capital providers to management is greater for large firms (Chow, 1982). Second, economies of scale should result in the marginal cost of operating a monitoring and bonding system decreasing with firm size (Menon and Williams, 1994;Anderson et al 1993;Chow, 1982). 4.…”

Section: Notesmentioning

confidence: 99%

See 2 more Smart Citations

The use of internal audit by Australian companies

Goodwin-Stewart

Kent

2006

Managerial Auditing Journal

163

203

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Purpose -The purpose of this study is to explore the voluntary use of internal audit by Australian publicly listed companies and to identify factors that lead listed companies to have an internal audit function. Design/methodology/approach -Drawing on the Institute of Internal Auditors' definition of internal auditing, the paper predicts that internal audit use is associated with factors related to risk management, strong internal controls and strong corporate governance. To test the predictions, the study combines data from a survey of listed companies with information from corporate annual reports. The paper also provides descriptive information on the use of internal audit. Findings -The results indicate that only one-third of the sample companies use internal audit. While size appears to be the dominant driver, there is also a strong association between internal audit and the level of commitment to risk management. However, the study finds only weak support for an association between the use of internal audit and strong corporate governance. Research limitations/implications -A limitation of our study is that some of the variables in the model may not be good proxies for the factors being measured. Refinement of the model and the variables used provides an opportunity for future research. Practical implications -The limited use of internal audit by Australian companies has important implications for sound corporate governance. Originality/value -This is the first study that identifies factors associated with the use of internal audit by Australian listed companies.

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Section: Internal Audit As a Control Mechanismmentioning

confidence: 99%

Section: Control Variablesmentioning

confidence: 99%

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The use of internal audit by Australian companies

Goodwin-Stewart

Kent

2006

Managerial Auditing Journal

163

203

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“…There are many studies on monitoring mechanisms (Kao et al, 2004;Slyke, 2006;Azim, 2012;Anderson, Francis, & Stokes, 1993). However, most of this studies are from developed and transiting countries like U.S, U.K, and Malaysia, leaving the developing countries like Nigeria far behind.…”

Section: Introductionmentioning

confidence: 99%

Managerial Ownership, Horizontal Agency Costs and Monitoring Mechanisms

Arowolo¹

2016

European Proceedings of Social &Amp; Behavioural Sciences

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Company operations are characterized by information asymmetry between the agent (management and the board of directors) and the principal (shareholders). The purpose of this study is to empirically examine the extent of monitoring mechanisms in Nigerian non-financial listed companies and the impact of managerial ownership and horizontal-agency-costs on the mechanisms. The study adopted a quantitative approach and distributed 332 questionnaires to 166 non-financial listed companies to obtain a cross-sectional data for the internal auditing. The findings give credible evidence that the horizontal-agency-cost is positively significant while managerial ownership is negatively significant. The findings of this study suggest policy implications for the monitoring roles of the board of directors as well as the internal and external auditors. Likewise, the findings are useful to the regulatory agencies and government for a further review of corporate governance guidelines. This paper contributes to knowledge by combining the three dimensions of monitoring mechanisms (directorship, internal and external auditing) in Sub-Saharan Africa.

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“…Alternatively, it could also be argued that when one person is in charge of both tasks, favorable decisions are reached faster provided that person is well aware of the decisions needed to improve the performance of the firm (Abdullah, 2004). The governance literature has only just begun to consider the role of the audit as a component of governance tool (Anderson et al, 1993). Conceptually, audit quality was defined as the market-assessed joint probability that the auditor discovers an anomaly in the financial statements, and reveals it (DeAngelo, 1981).…”

Section: Board Leadership Structure and Audit Qualitymentioning

confidence: 99%

Board Leadership Structure, Audit Committee and Audit Quality: Evidence from Manufacturing Companies in Sri Lanka

Velnampy¹,

Nadarajah²,

Tharanika³

et al. 2014

IJBM

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Purpose: This paper aims to analyze whether the corporate governance attributes such as board leadership structure, audit committee meetings held, size of independent non-executive directors and size of non-executive directors have significant impact on audit quality of manufacturing companies listed on Colombo Stock Exchange, Sri Lanka during 2011 to 2013. Research Design:The study takes 32 manufacturing companies listed in Sri Lanka out of 36 as sample and employs binary logistic regression method for modeling the association between a binary dependent variable such as audit quality and multiple independent variables such as board leadership structure, audit committee meetings held, size of independent non-executive directors, and size of non-executive directors. Findings:The study finds the logistic regression model for overall evaluation, statistical tests of individual predictors and goodness-of-fit. As per the output, Hosmer and Lemeshow test reveals the model for goodness of fit with chi-square of 17.503 and with probability value of 0.008, which is significant at five percent levels. Cox & Snell R Square reveal 56.2 % of the variance in audit quality. Whereas board leadership structure and audit committee meetings held have significant relationship with audit quality, size of non-executive directors and size of independent non-executive directors have shown insignificant association.Research Limitation-As sample size is relatively small, there may be a challenge to generalize the results of this study widely.Originality-This research contributes to the literature by adding the significant association between some corporate governance variables and audit quality. The findings from this research could be generalized to the companies similar to this category.

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Auditing, directorships and the demand for monitoring

Cited by 186 publications

References 20 publications

The use of internal audit by Australian companies

The use of internal audit by Australian companies

Managerial Ownership, Horizontal Agency Costs and Monitoring Mechanisms

Board Leadership Structure, Audit Committee and Audit Quality: Evidence from Manufacturing Companies in Sri Lanka

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