Does Accounting Research Matter?

Henderson, Scott; Peirson, Graham

doi:10.1080/00014788.1978.9729133

Cited by 14 publications

(13 citation statements)

References 3 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Deegan (2009) reports that business performance is liked to firm legitimacy, suggesting that firms that are unable to align their business with the values of society will have lower levels of performance relative to firms with values that congruent to society. Furthermore, Henderson et al (2004) suggest legitimate management actions convey the image that an organization is operating in alignment with the expectations of the society. Therefore, South Korea provides a unique opportunity to capture audit effort as a legitimacy strategy because historically the audit quality of South Korean firms has come under public scrutiny.…”

Section: Literature Reviewmentioning

confidence: 99%

Do credit ratings influence the demand/supply of audit effort?

Lim

Mali

2020

JAAR

View full text Add to dashboard Cite

PurposeFirm management has an incentive to improve credit ratings to enjoy the reputational and financial benefits associated with higher credit ratings. In this study, the authors question whether audit effort in hours can be considered incrementally increasing with credit ratings. Based on legitimacy theory, the authors conjecture that firms with higher credit ratings will demand higher levels of audit effort to signal audit and financial quality compared to firms with higher levels of credit risk.Design/methodology/approachThe authors conduct empirical tests using a sample of Korean-listed firms using a sample period covering 2001–2015.FindingsThe results show that firms with higher credit ratings demand higher audit effort in hours compared to client firms with lower credit ratings. The authors interpret that firms with higher ratings (lower risk) demand higher levels of audit effort in hours to reduce information asymmetry and to demonstrate that financial reporting systems are robust based on audit effort signaling audit quality. The authors also interpret that firms with lower credit ratings do not have incentives to signal similar audit quality. The authors also capture the “Big4 auditor expertise” effect by demonstrating that client firms audited by nonBig4 auditors demand additional audit effort with increasing credit rating compared to Big4 clients.Research limitations/implicationsAudit effort is considered a signal of firm risk in the literature. This study’s results show evidence that audit effort is inversely related to firm risk.Practical implicationsThe results show that audit hour information is informative and likely managed by firm stakeholders. Internationally, it is not possible to capture the audit demand of clients because listing audit hours on financial statements is not a rule. Given that audit hours can be considered informative, the authors believe that legislators could consider implementing a policy to mandate that audit hours be recorded on international annual reports to enhance transparency.Originality/valueSouth Korea is one of few countries to list audit effort on annual reports. Therefore, the link between audit effort and credit ratings is unique in South Korea because it is one of few countries in which market participants likely monitor audit effort.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Do credit ratings influence the demand/supply of audit effort?

Lim

Mali

2020

JAAR

View full text Add to dashboard Cite

show abstract

“…The classic definition of agency theory posits that agents prefer their own interests to those of company principals and that they are likely to act opportunistically (Hunton et al , 2006; Jensen and Meckling, 1976). When managers make self-interested decisions, a situation known as “the agency problem” arises, whereby the wealth of the principals is transferred to the agents (Henderson et al , 2004; Jensen and Meckling, 1976). In establishing good corporate governance principles, the OECD (2004) aims to mitigate the agency problem caused by separating owners and managers (Sharar, 2006).…”

Section: Conceptual Framework and Review Of The Literaturementioning

confidence: 99%

Board and audit committee effectiveness in the post-ASX Corporate Governance Principles and Recommendations era

Safari

2017

View full text Add to dashboard Cite

Purpose The purpose of this paper is to contribute to the corporate governance literature by examining the aggregate effect of board and audit committee characteristics on earnings management practices, particularly in the period following the introduction of the second edition of the Australian Securities Exchange (ASX) Corporate Governance Principles and Recommendations. Design/methodology/approach This paper begins by embarking on an extensive review of extant empirical research on boards of directors and audit committees. Then, the paper reports on the use of a quantitative analysis approach to specify the relationship between board and audit committee characteristics (introduced by the ASX Corporate Governance Council) and the level of absolute discretionary accruals as a proxy for earnings management. Findings The findings suggest that greater compliance with board and audit committee principles is linked to lower earnings management, indicating that deliberate structuring of boards and audit committees is an effective approach for enhancing a firm’s financial reporting quality and providing support for the efficacy of the second edition of principles and recommendations related to boards and audit committees suggested by the ASX Corporate Governance Council. Practical implications This study significantly extends the literature and has notable implications for financial reporting regulators, as the findings regarding the monitoring role of boards and audit committees should be beneficial for future revisions of corporate governance principles and recommendations. Originality/value This study focuses on the aggregate effect of board characteristics recommended by the Australian Corporate Governance Council on earnings management practices, and the results support the effectiveness of the board and audit committee characteristics recommended by the ASX Corporate Governance Council. New directions for future improvements to the principles and recommendations are identified.

show abstract

“…The current cash equivalent must be the amount which would involve the lower cash outlay. A procedure similar to that proposed by Iselin was also advocated by Henderson and Peirson [6].…”

Section: Cllatnbersmentioning

confidence: 92%

“…Henderson and Peirson ( [6], pp. 59-63) introduced the effect of taxation on the measurement of the current cash equivalent of a liability.…”

Section: Cllatnbersmentioning

confidence: 98%