THE RIGHT PERSON AT THE RIGHT TIME: AUDIT COMMITTEE MEMBERS AND THE QUALITY OF FINANCIAL INFORMATION

Article Sidebar

PDF
Published: 2018-06-06
DOI: https://doi.org/10.3232/UBR.2018.V15.N2.01

Main Article Content

Félix López Iturriaga
Universidad de Valladolid (Spain) NRU Higher School of Economics (Russia)
http://orcid.org/0000-0003-0875-5283
Nuria Reguera Alvarado
Universidad de Sevilla
César Zarza Herranz
Universidad de Valladolid Banco de Santander Universidad de Alcalá de Henares

Abstract

We analyze some personal characteristics of the members of the audit committee of the Spanish listed firms and the relation between these characteristics and earnings management. We find a non-linear relation with tenure, so that long tenures can initially compromise the directors’ independence but, after a given threshold, longer tenures improve the expertise of the members. Serving in too many boards has a negative influence on the ability of directors to detect earnings management, and higher academic background and more diverse professional background improve the directors’ abilities.

Article Details

Issue

No. 58 (2018): SECOND QUARTER

Section

Governance, Ethics, Politics

Author Biographies

Félix López Iturriaga, Universidad de Valladolid (Spain) NRU Higher School of Economics (Russia)

Catedrático de Economía Financiera y Contabilidad

Departamento de Economía Financiera y Contabilidad

Nuria Reguera Alvarado, Universidad de Sevilla

Profesora contratada doctora de Economía Financiera y Contabilidad

César Zarza Herranz, Universidad de Valladolid Banco de Santander Universidad de Alcalá de Henares

Auditor interno

Profesor asociado

How to Cite

THE RIGHT PERSON AT THE RIGHT TIME: AUDIT COMMITTEE MEMBERS AND THE QUALITY OF FINANCIAL INFORMATION. (2018). UCJC Business and Society Review (formerly Known As Universia Business Review), 58. https://doi.org/10.3232/UBR.2018.V15.N2.01

References

Andres, C., van den Bongard, I., & Lehmann, M. (2013). Is Busy Really Busy? Board Governance Revisited. Journal of Business Finance & Accounting, 40(9-10), 1221-1246. doi: 10.1111/jbfa.12051

Baccouche, S., Hadriche, M., & Omri, A. (2013). The Impact Of Audit Committee Multiple-Directorships On Earnings Management: Evidence From France. Journal of Applied Business Research, 29(5), 1333-1342.

Badolato, P. G., Donelson, D. C., & Ege, M. (2014). Audit committee financial expertise and earnings management: The role of status. Journal of Accounting and Economics, 58(2–3), 208-230. doi: 10.1016/j.jacceco.2014.08.006

Ben-Amar, W., Francoeur, C., Hafsi, T., & Labelle, R. (2013). What Makes Better Boards? A Closer Look at Diversity and Ownership. British Journal of Management, 24(1), 85-101. doi: 10.1111/j.1467-8551.2011.00789.x

CNMV. (2015). Good Governance Code of Listed Companies. Madrid.

CNMV. (2017). Technical guide on audit committees at public-interest entities Madrid.

Dhaliwal, D., Naiker, V., & Navissi, F. (2010). The association between accruals quality and the characteristics of accounting experts and mix of expertise on audit committees. Contemporary Accounting Research, 27(3), 787-827. doi: 10.1111/j.1911-3846.2010.01027.x

European Banking Authority, & European Securities and Markets Authority. (2017). Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders under Directive 2013/36/EU and Directive 2014/65/EU. Paris. London.

European Central Bank. (2017). Guide to fit and proper assessments. Frankfurt.

European Commission. (2011). Green paper on the EU corporate governance framework. Brussels: European Commission.

Habbash, M., Sindezingue, C., & Salama, A. (2013). The effect of audit committee characteristics on earnings management: Evidence from the United Kingdom. International Journal of Disclosure and Governance, 10(1), 13-38. doi: 10.1057/jdg.2012.2

Jaafar, M. A., Wan-Hussin, W. N., & Bamahros, H. M. (2016). Are All Audit Committee Directors Equal? The Busyness of Chair, Financial Expert and Other Member. Information, 19(7B), 2893.

Kusnadi, Y., Leong, K. S., Suwardy, T., & Wang, J. (2016). Audit Committees and Financial Reporting Quality in Singapore. [journal article]. Journal of Business Ethics, 139(1), 197-214. doi: 10.1007/s10551-015-2679-0

Lee, G., & Fargher, N. L. (2017). The Role of the Audit Committee in their Oversight of Whistle-Blowing. Auditing: A Journal of Practice & Theory, Forthcoming. doi: 10.2308/ajpt-51769

Monterrey, J., & Sánchez, A. (2008). Gobierno corporativo, conflictos de agencia y elección de auditor. Revista Española de Financiación y Contabilidad, 37(137), 113-156.

Palazuelos Cobo, E., Herrero Crespo, Á., & Montoya del Corte, J. (2017). Are credit risk analysts concerned about the audit of the financial statements of SMEs?/¿Importa la auditoría de los estados financieros de las Pymes a los analistas de riesgo de crédito? Universia Business Review, 53, 150-187.

Parte Esteban, L., & Gonzalo Angulo, J. A. (2008). ¿Añaden las partidas extraordinarias calidad al resultado? Universia Business Review, 18, 28-39.

Parte Esteban, L., & Gonzalo Angulo, J. A. (2009). ¿Se maquillan los resultados de las cotizadas en España? Universia Business Review, 21, 36-55.

Ruiz Barbadillo, E., Gómez Aguilar, N., & Carrera Pena, N. (2009a). Derogación de la rotación obligatoria de auditores y calidad de la auditoría. Revista de Economía Aplicada, 49(17), 105-134.

Ruiz Barbadillo, E., Gómez Aguilar, N., & Carrera Pena, N. (2009b). Does Mandatory Audit Firm Rotation Enhance Auditor Independence? Evidence from Spain. Auditing: A Journal of Practice & Theory, 28(1), 113-135. doi: 10.2308/aud.2009.28.1.113

Sharma, V. D., & Kuang, C. (2014). Voluntary Audit Committee Characteristics, Incentives, and Aggressive Earnings Management: Evidence from New Zealand. International Journal of Auditing, 18(1), 76-89. doi: 10.1111/ijau.12013

Sultana, N., & Mitchell Van der Zahn, J. L. W. (2015). Earnings conservatism and audit committee financial expertise. Accounting & Finance, 55(1), 279-310. doi: 10.1111/acfi.12042

Tanyi, P. N., & Smith, D. B. (2015). Busyness, Expertise, and Financial Reporting Quality of Audit Committee Chairs and Financial Experts. Auditing: A Journal of Practice & Theory, 34(2), 59-89. doi: 10.2308/ajpt-50929

Tepalagul, N., & Lin, L. (2015). Auditor independence and audit quality: A literature review. Journal of Accounting, Auditing & Finance, 30(1), 101-121.

Vafeas, N. (2003). Length of Board Tenure and Outside Director Independence. Journal of Business Finance & Accounting, 30(7-8), 1043-1064. doi: 10.1111/1468-5957.05525

Wang, M.-J., Su, X.-Q., Wang, H.-D., & Chen, Y.-S. (2017). Directors’ education and corporate liquidity: evidence from boards in Taiwan. Review of Quantitative Finance and Accounting, 49(2), 463-485.