Do audit committee attributes influence integrated reporting quality? An agency theory viewpoint

Abstract

The limits of financial disclosure in meeting the investors' needs have led to the request for reporting frameworks capable of incorporating information of different nature. Integrated reporting (IR), which is the latest novelty in organisational reporting practice, promises to bring together material financial and non‐financial information. IR has received considerable academic attention in recent years. However, little attention has been paid to the role of the audit committee in IR processes, despite the influence that this body has on disclosure, thanks to its supervisory and monitoring functions. This study bridges this gap by analysing the effect of the audit committee attributes on integrated reporting quality (IRQ) from an agency theory perspective. The regression analysis, conducted on a sample of 125 international firms, demonstrated a positive effect of size, independence and meeting frequency of the audit committee on IRQ and a non‐significant effect of financial expertise.

Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?

“…A positive impact of AC independence on FRQ (using different proxies, such as lower earnings management, internal control quality, auditor independence and quality) is found (Klein 2002;Carcello and Neal 2003;Krishnan 2005;Raghunandan and Rama 2007). In line with this, Haji (2015) and Buallay and Al-Ajmi (2019) find a positive impact of AC independence on disclosure quantity, while Salem et al (2019) and Raimo et al (2020) find a positive impact on disclosure quality.…”

“…On the one hand, based on agency perspective, some studies find that the number of AC meetings is associated with higher FRQ (proxied by different measures, such as auditor selection and auditor quality, fewer restatements and less aggressive earnings management) (Abbott and Parker 2000;Xie et al 2003;Abbott et al 2004;Bédard et al 2004;Gebrayel et al, 2018). In line with this, a positive relationship is found between AC meeting frequency and the voluntary disclosure level (Li et al 2012;Allegrini and Greco 2013;Haji 2015;Al-Maghzom et al 2016;Buallay and Al-Ajmi 2019;Raimo et al 2020).…”

“…Moreover, Anderson et al (2004) and suggest that a large AC provides a greater monitoring function, as it has more members to undertake various monitoring tasks, which could enhance FRQ. Furthermore, previous studies find that AC size positively affect FRQ (Bédard et al 2004; Ahmad-Zaluki and Wan-Hussin 2010) and disclosure quantity (Li et al 2012;Haji 2015;Buallay and Al-Ajmi 2019;Raimo et al 2020).…”

“…The first group finds a negative impact of AC with financial expertise on disclosure quantity (Li et al 2012;Al-Maghzom et al 2016;Buallay and Al-Ajmi 2019). The second group (e.g., Wang and Hussainey 2013;Raimo et al 2020; Al Lawati and Hussainey 2020) finds no impact of AC financial expertise on the level of voluntary disclosure. Therefore, based on these arguments, the effectiveness of financial expertise and its impact on disclosure is still an empirical question.…”

“…We use multivariate ordinary least squares (OLS) regression following prior studies (e.g. Abad and Bravo 2018;Kılıç and Kuzey 2018;Bravo and Alcaide-Ruiz 2019;Raimo et al 2020;Al Lawati and Hussainey 2020) after ensuring that all the necessary assumptions for OLS have been met. The two models are as follows:…”