This study investigates the influence of audit committee attributes on the corporate environmental disclosure using listed non-financial firms in Nigeria as case study. The population of the study ...consists of all non-financial listed firms on the Nigerian Exchange Group (formerly NSE). Using purposive sampling techniques, the study selected a total 70 listed non-financial firms having required information necessary for the study between 2011 and 2020. The study employed fixed effect and feasible generalized least square (FGLS) panel regression technique. The fixed effect of FGLS regression analysis indicates that while audit committee independent and audit committee gender diversity recorded significant positive influence on the environmental disclosure among Nigerian listed non-financial firms, the impact of audit committee size and audit committee meetings were negligible. Based on results, it is not the size of the committee nor the number of their meetings that matter for the disclosure of environmental information but the composition of the committee in terms of female and independent members representation. In conclusion, the study found evidence in support of the critical role of audit committee characteristics in environmental disclosure practices among Nigerian listed non-financial firms. Hence, it is recommended that efforts should be made to encourage higher composition of female and independent members on the audit committee.
We investigate whether the experience of audit committee members is associated with audit quality. In order to comprehensively analyse the experience of audit committee members, we include audit ...committee member tenure, age and multiple-directorships in our analysis. Using observations from 2001 to 2012, we undertake analysis on 13,155 firm-year observations and find that all our proxies of audit committee member experience are positively associated with audit fees. A range of additional tests, including using discretionary accruals as an alternative measure of audit quality and differences-in-differences analysis, support our main findings and our results consequently make a number of contributions to both the literature and policy making. One possible policy contribution is that regulators may wish to consider audit committee characteristics representing experience when framing recommendations to improve audit quality and thereby, financial reporting by firms.
The aim of this research is to examine the impact of three audit committee characteristics on corporate social and environmental responsibility (CSR) disclosure: the existence of an audit committee, ...audit committee independence, and audit committee financial expertise. Moreover, this research analyzes the moderating effect of board gender diversity between these audit committees' attributes and CSR reporting. The results of analyzing 13,178 firm‐year observations of non‐financial companies show that the presence of an audit committee and audit committee financial expertise are positively associated with CSR disclosure. However, a higher proportion of non‐executive directors in audit committees has a negative effect on the disclosure of CSR information. These findings suggest that some audit committees' features play an important role in ensuring the reporting of environmental, social, and economic information. Our evidence also indicates that the presence of female directors on boards increases the positive impact of financial expert membership of audit committees on CSR disclosure, while women directors moderate any negative effect of the percentage of independent directors on audit committees on CSR reporting by increasing the latter. In addition, female directors moderate the positive impact of the existence of an audit committee on the disclosure of CSR information by reducing the latter.
The audit committee chair can play a key role in the success of audit committee outcomes. The role of the chair is different than that of the other audit committee members. However, most of the ...research on audit committees does not distinguish the role of the chair from that of the other committee members. Moreover, research does not give any insight into the necessary abilities to fulfill this role. Our study investigates the audit committee chair's abilities. Based on 27 interviews, we find that the chair manages multiple relationships and possesses well‐developed leadership abilities that go beyond financial expertise, such as various types of communication skills. Our research sheds light on the unique role of the audit committee chair. It also provides useful insights to corporate boards and policy‐makers to help them identify the audit committee chair with the right abilities.
Past studies have investigated the relationship between audit committee features and earnings management and reported mixed and inconclusive results. Some studies have found a significant ...relationship, while others have not. This study aims to explain these mixed results in the literature by dividing earning management into two groups: accrual and real earnings management (at three levels of sales, general and administrative costs, production costs and cash flows operation) and re-examining the relationship.
The statistical model used in this study is a multivariate regression model; further, the statistical technique used to test the hypotheses is panel data.
The findings show that both the audit committee members' financial expertise and the audit committee's size affect the accrual earnings management. However, the results show no meaningful relationship between the audit committee features and real-based earnings management at any levels of sales, general and administrative costs, production costs and cash flow operation. In addition, the findings suggest no meaningful relationship between the independence of the audit committee's members and accrual earnings management. In other words, not separating the earning management into ‘accrual’ and ‘real’ could be the critical factor for the reported mixed and inconsistent results in the literature.
The findings of the current study provide an important guideline for investors and stakeholders to separate ‘accrual’ from ‘real’ earning management and pay more attention to the importance of audit committee features to limit the opportunities of earnings management. Indeed, by understanding the relationship between audit committee features and earnings management, investors and stockholders can make appropriate decisions regarding the optimal choice of funds.
Dividing the earning management into two groups (accrual versus real) and re-examining its relationship with the audit committee features is new in this paper. Identifying one of the possible reasons for the past mixed and inconsistent results in the literature is also an incremental contribution provided by this study.
SUMMARY
We investigate how the number of audit committee chair positions and other audit committee financial expertise positions held by the audit committee chairman and the audit committee financial ...experts affects their ability to oversee a company's financial reporting process. We argue that these two audit committee roles are vital to the functioning of the audit committee and that their over commitment affects audit committee oversight and the firm's financial reporting quality. We observe a significant negative association between financial reporting quality and the number of audit committee chair positions and other audit committee financial expertise positions held by the audit committee chairman. We also find a significant negative association between financial reporting quality and the number of audit committee chair positions and other audit committee financial expertise positions held by audit committee financial experts. Firms with busy audit committee chairs or busy financial experts have significantly higher levels of abnormal accruals, and are more likely to meet or beat earnings benchmarks, which is consistent with the busyness hypothesis. This adverse effect, nonetheless, does not extend to nonaudit committee chairs and nonaudit committee financial experts. We interpret these results to indicate that the busyness of the audit committee chair and financial expert weakens the monitoring and oversight role that audit committees play in the financial reporting process.
SYNOPSIS
We investigate whether audit committees use voluntary disclosures to signal the committees' higher level of involvement in the audit partner-selection process, which contributes to higher ...levels of audit quality. Audit committees more involved in the partner-selection process should ensure the selection of a more rigorous partner. We test this conjecture by first identifying partners new to audit engagements. We then compare audit quality for companies whose audit committees disclose involvement in the selection of the new partner to those without this disclosure. We find that this disclosure is positively associated with audit quality (measured using discretionary accruals, misstatements, and meeting consensus analyst forecasts by a very small margin). Our results are more salient for complex companies and those with powerful audit committees. These findings highlight that audit committees use their disclosures to signal involvement in the partner-selection process and are relevant to the Securities and Exchange Commission.
Data Availability: The data used in this paper are publicly available from the sources indicated in the text.
JEL Classifications: M41; M48.
Abstract
We investigate whether the characteristics of audit committee (AC) chairs are associated with decisions about auditor choice, audit fees and audit quality. Using hand‐collected Australian ...data, firms with AC chairs who have longer tenure and multiple AC memberships across several boards are found to be more likely to choose Big 4 and/or industry specialist auditors, pay higher audit fees and have lower discretionary accruals. Those AC chairs with higher business qualifications are more likely to hire a Big 4 auditor, pay higher audit fees and have lower discretionary accruals, while AC chairs with professional qualifications are more likely to hire a Big 4 and/or industry specialist auditor. In contrast, firms with AC chairs who are executive directors are less likely to hire a Big 4 auditor and have higher discretionary accruals. Our findings contribute to the literature by documenting that various characteristics of AC chairs are important for enhancement of auditor selection and audit quality.
The extant literature has shown the impact of demographic characteristics such as gender of audit committee members on earnings management but ignored the importance of the board room's age ...diversity. Going beyond the prior literature, our study aims to examine how the age diversity of audit committee financial experts (ACFEs) influences the financial reporting quality of Chinese non‐financial firms. We found a negative relationship between ACFEs' age diversity and earning management. Our findings also show that younger ACFEs mitigate earnings management as compared to older ACFEs. We further examined this relationship among state‐owned enterprises (SOEs) and privately owned enterprises in China and confirmed that the age diversity of ACFEs influences earnings management differently. However, younger ACFEs working in SOEs mitigates earnings management than their counterpart in privately owned companies. Our result maintains its robustness after controlling for endogeneity and employing a different measure of earnings management. Our result has relevance for selecting financial experts and the audit committee's overall composition, showing that including younger ACFEs will ensure more efficient control of firms' management. This finding is also relevant for policymakers, especially Chinese regulators, offering them insight into promoting audit committee effectiveness.
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