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Article
Publication date: 3 May 2016

Inaam ZGARNI, Khmoussi HLIOUI and Fatma ZEHRI

A steady stream of literature has examined relationships between audit committee effectiveness, audit quality and financial reporting quality. The purpose of this paper is to…

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Abstract

Purpose

A steady stream of literature has examined relationships between audit committee effectiveness, audit quality and financial reporting quality. The purpose of this paper is to connect these various streams of research to provide an empirical evidence from an Arabic emergent country namely Tunisia. This study examines the role of audit committee effectiveness and audit quality on financial reporting quality particularly to mitigate the earnings management in the Tunisian companies before and after financial security law adoption.

Design/methodology/approach

The study uses ordinary least squares regression model to investigate the effect of audit committee characteristics, audit quality attributes and the interaction between these two overseeing mechanisms on earnings management for a sample of 29 non-financial listed Tunisian firms during the period 2001-2009.

Findings

The results document a substitute effect between the presence of Big Four auditor and effective audit committee in order to reduce the discretionary accruals before the enforcement of law no. 2005-96 dealing with the financial securities. The authors find a complementarity link between the score of audit committee’s effectiveness and auditor industry specialization’s to constrain earnings management. Finally, the findings show a complementary relation between audit committee’s effectiveness and audit tenure, after the passage of the law.

Research limitations/implications

This study shows the value of considering the institutional setting in governance research. This paper is restricted to firms in the Tunisia from 2001 to 2009. Future research should investigate this issue in other settings and periods.

Practical implications

This study is important to practitioner and academic literature, policy makers and professional accounting bodies as it shows that legislative reforms can enhance companies to adopt good governance practices in emerging countries. The results also give useful information to investors in examination the effect of audit committee characteristics and audit quality on earnings quality. Another interesting practical focus of this study is to assess how successful was the implementation of financial security law in improving audit transparency and support shareholder involvement in the audit process.

Originality/value

The results suggested that governance regulation is a substitute for strong governance mechanisms in both the pre- and post-law periods.

Details

Journal of Accounting in Emerging Economies, vol. 6 no. 2
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 14 March 2016

Zgarni Inaam and Halioui Khamoussi

Many researchers, in several contexts, have investigated the influence of audit committee effectiveness and audit quality variables on reducing the extent of earnings management…

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Abstract

Purpose

Many researchers, in several contexts, have investigated the influence of audit committee effectiveness and audit quality variables on reducing the extent of earnings management, and empirical evidence is rather inconsistent.

Design/methodology/approach

The aim of this paper is to meta-analyze the results of 58 prior studies that examined whether differences in results are related to moderating effects associated with corporate governance mechanisms or measures of earnings management.

Findings

The findings show that the meta-analysis identifies many significant relationships. The independence of the audit committee, its size, expertise and the number of meetings have a negative relationship with earnings management. Similar negative relationships exist between auditor size, specialization and earnings management.

Research limitations/implications

This study contributes to the corporate governance literature. Further, recognizing the function of an audit committee and audit quality shows the value of considering an institutional setting in governance research. This study is significant to academic and practitioner literatures, policy makers and professional accounting bodies as it shows that governance reforms promote companies to adopt good governance practices. The results also give useful information to investors in examining the effect of audit committee characteristics and audit quality on earnings quality.

Originality/value

This study extends existing research on audit committee and audit quality to oversee both accrual and real earnings management using meta-analysis. Thus, this study has the potential to help stakeholders, board of directors, regulators and auditors, who are related with enhancing the supervision of firms and reducing the opportunities given to managers, to engage in earnings management.

Details

International Journal of Law and Management, vol. 58 no. 2
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 3 April 2019

Mangesti Sri and Solimun Solimun

The purpose of this paper is to evaluate the effect between audit quality and risk taking on value creation.

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Abstract

Purpose

The purpose of this paper is to evaluate the effect between audit quality and risk taking on value creation.

Design/methodology/approach

Population under study is companies on the Jakarta Stock Exchange from 2004 to 2015. Considering the limitations, 145 companies studied in this research, which made a sample containing 1,740 company-years. This study is based on the panel data and multivariate regression method. This research uses fixed and random effects to estimate the regression. In this paper, five components of audit quality, including auditor specialization, tenure, audit firm size, ownership concentration and the percentage of unbounded members of the board, are studied.

Findings

The results of this study indicate that among these five components as well as the risk factor, only tenure and ownership concentration have a significant effect on value creation of companies. In other words, both ownership concentration and tenure are positively effective in value creation and other variables have no significant effect on value creation. Besides, none of them could affect the risk taking on value creation.

Originality/value

The outcomes of the current study help audit market and capital market in developing nations.

Details

Journal of Accounting in Emerging Economies, vol. 9 no. 2
Type: Research Article
ISSN: 2042-1168

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