Covid-19 disclosure: do internal corporate governance and audit quality matter?

Abdelhak, Elsayed; Hussainey, Khaled; Albitar, Khaldoon

doi:10.1108/ijaim-05-2022-0108

Cited by 16 publications

(4 citation statements)

References 116 publications

(161 reference statements)

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“…While the evidence is mixed, overall, it shows that MAR does not increase audit quality. Studies have also shown that weakness in the internal control system in a firm are related to low auditor efforts (Abdelhak et al, 2023;Chen et al, 2019;Hammami and Lyubimov, 2021). Based on the extant literature cited above, we test the following hypothesis: H1.…”

Section: Mandatorymentioning

confidence: 96%

Mandatory auditor rotation and audit quality

Dayanandan

Kuntluru

2023

IJAIM

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Purpose In the post-Enron era around the world, the role of auditor is widely debated. There is an increasing concern that an auditor’s continuous involvement with clients could impair audit quality – the negative view. There is also a positive view that a long auditor tenure leads to accumulation of client-specific knowledge over time, which could lead to high-quality audits. The empirical result with regards to impact of mandatory auditor rotation (MAR) is mixed world-wide. This study aims to examine whether MAR rules implemented in 2017 impact audit quality in India. Design/methodology/approach Using a unique setting in which MAR was required from 2017 to 2018 onwards in India, this study provides empirical evidence of the impact of MAR regulation on audit quality (modified audit opinion). The study uses data for 714 firms (4,284 firms) for six years (three years before MAR and three years after MAR regulation in India). Findings The study found that auditor tenure and MAR had significant negative impacts on audit quality, validating the “positive” view of audit tenure and audit quality. In addition, concentrated ownership had a negative impact on audit quality, implying the control and influence by concentrated ownership on auditors and audit opinion. The analysis shows that MAR regulation has not yielded the intended objective of improving audit quality in India. MAR is not a good template for improving audit quality. Research limitations/implications The findings of the study are useful to policymakers, regulators, managers, investors and users of financial reports. The study calls for public policy on auditor rotation based on objective scientific evidence. In light of the evidence in India that MAR does not lead to better audit quality, the study calls for reset of regulatory policy in India. Practical implications The study provides valuable insights to analysts, regulators and other users of financial accounts about the implications of MAR in India. Originality/value The study is one of the few to report on the impact of MAR, particularly in the context of an emerging market economy such as India.

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Section: Mandatorymentioning

confidence: 96%

Mandatory auditor rotation and audit quality

Dayanandan

Kuntluru

2023

IJAIM

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“…Similar scenario applies to companies with high debt ratio, where they suggest that if a company is not careful with its voluntary disclosure, information related to COVID-19 outbreak could be affecting the company’s reported earnings. Abdelhak et al (2022), in their research, examined the Egyptian public companies to identify the factors influencing voluntary disclosure related to COVID-19 information from a different perspective of corporate governance. The researchers extended the works of Elmarzouky et al (2021) and Albitar et al (2022) by specifically looking into several elements of corporate governance and audit quality.…”

Section: Literature Reviewmentioning

confidence: 99%

An exploratory study that uses textual analysis to examine the financial reporting sentiments during the COVID-19 pandemic

Non

Aziz

2023

JFRA

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Purpose This paper aims to examine if Malaysian public listed companies have expressed any specific sentiment(s) when publishing their financial performance during the COVID-19 pandemic. Design/methodology/approach The disclosed sentiments contained in the management discussion and analysis section of the companies’ annual reports were extracted by means of computer-automated textual analysis through the linguistic inquiry and word counts and the Loughran–McDonald Financial Sentiment Dictionary. Next, a correlation analysis was conducted. Finally, a qualitative content analysis (QCA) was conducted to confirm these sentiments. Findings The analysis shows that companies adopted various tones of sentiments when communicating with their stakeholders. Most companies used negative sentiments to voice their concerns about how the COVID-19 pandemic has impacted upon their business operations. Only a few companies reflected positive sentiments, whilst those that experienced operating losses also expressed uncertainty. Research limitations/implications This study may assist either the regulators or accounting bodies to introduce a reporting framework that public companies can adopt during natural hazards. It also provides useful insights to (potential) investors to enable them to better understand the business landscape. For future research, the same study could be conducted on more countries so that their experiences can be used to better understand the business phenomenon from a global perspective. Originality/value This study is one of few studies to adopt automated textual analysis and QCA to examine the exhibited sentiments when public companies reported their financial performance during the COVID-19 pandemic.

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“…In addition, the findings of Chang and Budiman (2023) also state that during the COVID-19 pandemic, companies have engaged in more fraudulent reporting. On the other hand, Abdelhak et al (2023) stated that the conditions created in the Covid-19 pandemic have reduced the quality of audit reports. Also, the findings of Bajary et al (2023) state that in addition to reducing the quality of internal audits, COVID-19 has led to a delay in the presentation of auditors' reports.…”

Section: The Effect Of Covid-19 On Fraudulent Reporting Incentives An...mentioning

confidence: 99%

A comparative analysis of the impact of ISIS and COVID-19 on fraudulent reporting motives and audit quality in Iraq

Al-Gburi,

Velashani,

Salehi

2023

J. Infras. Policy. Dev.

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The Corona epidemic, as a global crisis, and the Islamic State of Iraq and Syria) ISIS (war, as a regional crisis in Iraq, have significantly impacted the atmosphere of companies and the continuation of their activities. The present study examines the role of these crises in creating incentives for fraudulent reporting and reducing or improving audit quality. It also compares the results of these two relationships with each other. In other words, the current paper sought to answer these issues: What effect did the ISIS war and the COVID-19 pandemic have on the fraudulent reporting motives of companies, and how did it affect the quality of their audits? In the end, the answer to this question was addressed: What are the differences and similarities between the study results of the impact of COVID-19 and ISIS on fraudulent financial reporting and audit quality? For this purpose, the data of 33 companies from 2008 to 2021 (462 observations) were collected to examine six formulated hypotheses, and the hypotheses were tested using the method of structural equations and analysis of variance. Interviews with experts were also used to determine quality indicators of auditing and fraudulent financial reporting so that indigenous indicators were selected and finalized. The results showed no significant relationship between the epidemic of the COVID-19 crisis and the motives of fraudulent reporting and audit quality and between the crisis of the ISIS war and the motives of fraudulent reporting. However, the ISIS war crisis has negatively and significantly impacted audit quality. Finally, the results indicated no significant difference between the impact of the epidemic crisis of COVID-19 and ISIS on the motives of fraudulent reporting. Still, there is a significant difference in the impact of the epidemic crisis of COVID-19 and ISIS on the audit quality. The knowledge enhancement of the present study is the development of literature on the impact of the Corona and ISIS crises on corporate financial reporting and auditing. The current paper, by studying the consequences of COVID-19 and ISIS, showed that further investigations in this field, especially regarding the capital market environment and A company, can obtain essential results based on which practical suggestions can be made for possible future crises.

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Covid-19 disclosure: do internal corporate governance and audit quality matter?

Cited by 16 publications

References 116 publications

Mandatory auditor rotation and audit quality

Mandatory auditor rotation and audit quality

An exploratory study that uses textual analysis to examine the financial reporting sentiments during the COVID-19 pandemic

A comparative analysis of the impact of ISIS and COVID-19 on fraudulent reporting motives and audit quality in Iraq

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