Effects of the audit committee and the fiscal council on earnings quality in Brazil

Abstract

This study evaluates the effects of the audit committee and the fiscal council with their different characteristics on earnings quality in Brazil. The proxies of earnings quality used are: relevance of accounting information, timeliness, and conditional conservatism. The sample consists of Brazilian companies listed on the Brazilian Securities, Commodities, and Futures Exchange (BM&FBOVESPA) with annual liquidity above 0.001 within the period from 2010 to 2013. Data were collected from the database Comdinheiro and the Reference Forms of companies available on the website of the Brazilian Securities and Exchange Commission (CVM) or the BM&FBOVESPA. The samples used in the study totaled 718, 688, and 722 observations for the value relevance, timeliness, and conditional conservatism models, respectively. The results indicate that different arrangements of the fiscal council and the existence of the audit committee differently impact the accounting information properties. The presence of the fiscal council positively impacted the relevance of equity, while the presence of the audit committee, the relevance of earnings. Conditional conservatism is evidenced in the group of companies with a permanent fiscal council, demonstrating that it is significant as a governance mechanism, rather than the installation for temporary operation when asked by shareholders in an ordinary general meeting. The presence of both showed significant earnings for the market, but they were not timely, something which exposes restriction to the relevance found. Lastly, the powered fiscal council showed a positive association only concerning the relevance of equity.

Impacto Do Novo Relatório Dos Auditores Independentes Nos Honorários Dos Auditores

“…Esse resultado está em linha com os achados de Brighenti et al (2016), Hallak e Silva (2012) e Jaramillo et al (2012), que identificaram um aumento na presença do comitê de auditoria nas empresas brasileiras nos últimos anos. Ressalte-se que o comitê de auditoria tem por objetivo assegurar a integridade e a tempestividade das informações financeiras, bem como defender os interesses de acionistas e outros stakeholders (Baioco & Almeida, 2017). O resultado identificado neste estudo sugere, portanto, que as empresas da amostra estão empenhadas em aumentar a qualidade das informações contábeis reportadas para o mercado.…”

The Determinant of Earning Quality Using State Ownership as Moderating Variable on Companies in Malaysia

“…Agency theory also explains that the existence of an audit committee can reduce agency costs borne by shareholders (Bilal, Chen, & Komal, 2018). The Sarbanes-oxley Act (SOX) explains that the definition of a financial expert includes accounting expertise and non-accounting financial expertise (Baioco, 2016). The documented requirement says that the company has at least three independent audit committees.…”

“…One of them must have financial expertise in charge of overseeing financial reporting (Bursa Malaysia, 2018). Research that supports ACFE has an effect on earnings quality, including Bilal et al, (2018); Primtasurbakti et al (2017);and Baioco (2016).…”

“…ACFE is also believed to be able to effectively monitor and limit management activities to manipulate revenue. This hypothesis refers to Bilal et al (2018); Primtasurbakti et al (2017); and Baioco (2016).…”

“…1, elaborates that the high quality of earnings an entity has is able to guarantee the existence of a more complete range of company financial performance features that are useful for decision making (Mousa & Desoky, 2019). Earnings quality is an indicator of the quality of the company's financial reporting performance (Baioco, 2016). The authors develop measures for earnings quality to reflect the effects of accounting risk, incentive variations and managers' information.…”