Factors of audit committee independence: An empirical study from an emerging economy

Ali, Md. Hossain; Meah, Mohammad Rajon

doi:10.1080/23311975.2021.1888678

Cited by 9 publications

(9 citation statements)

References 68 publications

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“…This is in line with Lu and Cao (2018, p. 81), who claims that “having fewer educated board members leads to more internal control problems”. This finding is also consistent with the notion that the board and the AC act as complements (Chau and Leung, 2006; Ruiz-Barbadillo et al , 2007; Ali and Meah, 2021; Wang et al , 2017; Hassan et al , 2017). Indeed, results highlight that a high level of education of board members encourages directors to increase the level of organizational internal control and to set up an AC (Wang et al , 2015, 2017; Agrawal and Chadha, 2005).…”

Section: Discussionsupporting

confidence: 90%

“…However, the opposite view claims that more effective boards are crucial antecedents of AC presence and composition as they can serve complementary roles (Chau and Leung, 2006; Ruiz-Barbadillo et al , 2007; Ali and Meah, 2021). In this regard, some studies document that the adoption of good board practices, such as the lack of CEO duality and the higher percentage of independent board members, are key determinants of AC presence, independence and financial expertise (Hassan et al , 2017; Ali and Meah, 2021; Ruiz-Barbadillo et al , 2007; Klein, 2002; Deli and Gillan, 2000; Menon and Williams, 1994; Drogalas et al , 2020; Chau and Leung, 2006).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

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Implications of directors’ education for audit fees: does the audit committee matter?

Saggese

Sarto

Romano

et al. 2023

MAJ

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Purpose Building upon multiple theories (i.e. agency, signalling and human capital), this paper aims to explore the effects of directors’ education on audit fees and to assess the mediating role of audit committee (AC). Design/methodology/approach The authors use an econometric analysis of Italian-listed non-financial firms during the period 2012–2015 using single-mediator models through ordinary least squares and logit regressions. Moreover, the authors apply the path analysis with the bootstrap method to test the mediating effect. Findings Findings show that the directors’ level of education improves audit fees. Additionally, the presence of an AC and the financial expertise of its members mediate this relationship. Practical implications By offering insights into the implications for audit pricing of the board and AC human capital, the paper helps regulators and policy-makers to understand which characteristic of such governance bodies improves auditing quality and the provision of better financial reporting. Originality/value The study uses a unique data set hand-collected from multiple sources and advances the auditing literature by shedding light on the reasons behind the influence of directors’ characteristics on audit fees and on the role played by the AC.

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Section: Discussionsupporting

confidence: 90%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Implications of directors’ education for audit fees: does the audit committee matter?

Saggese

Sarto

Romano

et al. 2023

MAJ

View full text Add to dashboard Cite

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“…AC independence is important in ensuring effective CG, high-quality financial reporting, and strong audit quality. Recent literature shows a positive relationship between AC independence and auditor reporting for financially distressed companies in an emerging economy (Saeed et al, 2022;Ali & Meah, 2021). Another study explored the relationship between AC characteristics and cognitive models.…”

Section: Audit Committee Independencementioning

confidence: 99%

“…The authors argued that AC independence is important in ensuring effective CG (Namakavarani et al, 2021). Ali and Meah (2021) studied the factors affecting the independence of ACs in the nonfinancial sector of Bangladesh. The authors find that AC independence is positively associated with the quality of financial reporting.…”

Section: Audit Committee Independencementioning

confidence: 99%

Impact of Audit Committee Effectiveness on Accrual and Real Earnings Management among Jordanian Listed Firms: Conceptual Paper

Al-Nohood,

Abdul Hamid,

Abdul Latiff

2024

IJARBSS

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The aim of this study is to conduct a comprehensive literature review on the impact of audit committees' independence, meeting frequency, and financial expertise on earnings management (both accrual and real). This review will act as a guide for upcoming empirical research. Many countries, when drafting corporate governance legislation, have focused on improving the characteristics of audit committees to deter unethical behaviour by management. Jordan is among the countries that have included provisions in the Corporate Governance Code for listed service and industrial sector companies that emphasise the characteristics of audit committees and their directors. The provisions were implemented in 2009 and revised in 2017. The current study suggests that researchers should choose a study sample from the years 2014 to 2019 to achieve different goals. First, leaving out years after corporate governance started in 2009 lets us check claims that the quality of corporate governance mechanisms improves over time. This is because the years proposed to be left out (2009)(2010)(2011)(2012)(2013) are long enough for listed companies to get used to corporate governance. Second, a comparison can be conducted on the quality of corporate governance mechanisms before and after recent reforms. Empirical studies are likely to provide feedback to both legislators and regulators as to whether governance mechanisms are working as intended.

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“…They confirmed that large firms with potential opportunities reduce the freedom of the AC, while firms with high leverage demand AC independence to ensure FRQ. Ali and Meah (2021) investigated the factors of AC independence and reported that larger corporate boards and independent directors increase AC independence. Thus, the current study examines the impact of AC quality and IAF quality on FRQ, which has not been widely tested in developed or developing country contexts.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

The mediation effect of audit committee quality and internal audit function quality on the firm size–financial reporting quality nexus

Islam

Slof²,

Albitar³

2023

JAAR

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PurposeThis study examines the effects of firm size on financial reporting quality (FRQ) through the mediating effects of audit committee (AC) quality and internal audit function (IAF) quality.Design/methodology/approachBased on data from a questionnaire survey and archival sources of non-financial companies listed on the Dhaka Stock Exchange (DSE), the authors perform both structural equational modeling and ordinary least squares (OLS) regression to test the developed hypotheses.FindingsResults show that the firm size is positively related to IAF quality. Firm size, AC quality and IAF quality are significantly associated with abnormal accruals (FRQ). Moreover, the authors find a mediation effect of the IAF quality on the relationship between firm size and FRQ, while no mediation effect is observed for AC quality. Thus, the study advocates companies focus on AC quality and IAF quality to enhance FRQ as it has a significant impact on corporate disclosure and investor decisions.Research limitations/implicationsFirst, the study is restricted to the survey questions that cover particular areas of the AC and IAF. Second, the sample selection focuses on relatively big industries in terms of the number of firms and excludes small sectors.Practical implicationsThe findings provide significant implications for professionals and policymakers in making regulatory reforms and revising existing policies to improve governance monitoring performance and FRQ.Originality/valueTo the best of the authors’ knowledge, this is the first study to explore the mediation effect of AC quality and IAF quality on firm size–FRQ nexus in a developing country.

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Factors of audit committee independence: An empirical study from an emerging economy

Cited by 9 publications

References 68 publications

Implications of directors’ education for audit fees: does the audit committee matter?

Implications of directors’ education for audit fees: does the audit committee matter?

Impact of Audit Committee Effectiveness on Accrual and Real Earnings Management among Jordanian Listed Firms: Conceptual Paper

The mediation effect of audit committee quality and internal audit function quality on the firm size–financial reporting quality nexus

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