Abstract:Purpose
This paper aims to investigate whether the managers’ emphasis on audit in the management’s discussion and analysis (MD&A) section of the 10-K filing, as part of the firm’s “tone at the top,” is linked to audit quality.
Design/methodology/approach
Adopting a computational linguistics approach, the authors measure the manager’s audit emphasis as the frequency of audit-related words in the MD&A. The authors then assess the relationship between audit emphasis and audit quality with ordinary least… Show more
“…Makhlouf (2022) exploration of audit committees' influence on impression management, marked a significant contribution to the understanding of management practices by consolidating prior research in emerging markets. Tam et al (2023) underscored the significance of 'tone at the top' in the context of audit quality, emphasizing the interconnectedness between audit committees, managerial decisions and financial outcomes, thus enhancing management theory. Solomon and Makuya (2023) furthered our comprehension of management theory by highlighting the critical importance of audit committee expertise within specific industry contexts.…”
PurposeThe purpose of this study is to investigate the impact of audit committee characteristics on firm performance. In particular, the authors employ the random-effects variant of the Hunter–Schmidt meta-analyze procedure to analyze the effects of key audit committee attributes, namely audit committee independence, audit committee expertise, audit committee size, audit committee meeting along with big four impact on firm performance. The authors hope to gain a better understanding of the function of audit committees in enhancing firm performance and to uncover potential discrepancies in prior findings due to varying economic levels or performance metrics.Design/methodology/approachThis study uses the Hunter–Schmidt method to conduct a meta-analysis of 39 previous studies published between 2012 and 2022 to investigate the relationship between audit committee characteristics and firm performance.FindingsThe results indicate that audit committee independence, expertise, size and affiliation with the big four have a significant and positive effect on firm performance, while audit committee meetings have a non-significant effect. Furthermore, findings suggest that companies should carefully consider the contextual factors that may impact the effectiveness of their corporate governance structures, such as economic level, when designing and implementing governance mechanisms.Originality/valueThis study is significant as it is the first to combine and analyze previous research on this topic and highlights the importance of certain audit committee characteristics in enhancing financial reporting quality and corporate governance.
“…Makhlouf (2022) exploration of audit committees' influence on impression management, marked a significant contribution to the understanding of management practices by consolidating prior research in emerging markets. Tam et al (2023) underscored the significance of 'tone at the top' in the context of audit quality, emphasizing the interconnectedness between audit committees, managerial decisions and financial outcomes, thus enhancing management theory. Solomon and Makuya (2023) furthered our comprehension of management theory by highlighting the critical importance of audit committee expertise within specific industry contexts.…”
PurposeThe purpose of this study is to investigate the impact of audit committee characteristics on firm performance. In particular, the authors employ the random-effects variant of the Hunter–Schmidt meta-analyze procedure to analyze the effects of key audit committee attributes, namely audit committee independence, audit committee expertise, audit committee size, audit committee meeting along with big four impact on firm performance. The authors hope to gain a better understanding of the function of audit committees in enhancing firm performance and to uncover potential discrepancies in prior findings due to varying economic levels or performance metrics.Design/methodology/approachThis study uses the Hunter–Schmidt method to conduct a meta-analysis of 39 previous studies published between 2012 and 2022 to investigate the relationship between audit committee characteristics and firm performance.FindingsThe results indicate that audit committee independence, expertise, size and affiliation with the big four have a significant and positive effect on firm performance, while audit committee meetings have a non-significant effect. Furthermore, findings suggest that companies should carefully consider the contextual factors that may impact the effectiveness of their corporate governance structures, such as economic level, when designing and implementing governance mechanisms.Originality/valueThis study is significant as it is the first to combine and analyze previous research on this topic and highlights the importance of certain audit committee characteristics in enhancing financial reporting quality and corporate governance.
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