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Article
Publication date: 12 December 2016

Mahdi Salehi and Mohammadamin Shirazi

The purpose of this study is to shed further light on the characteristics of an audit committee (AC) and its probable relationship with the quality of financial reporting and…

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Abstract

Purpose

The purpose of this study is to shed further light on the characteristics of an audit committee (AC) and its probable relationship with the quality of financial reporting and disclosure. Based on the findings of extant research that there are different factors that may have implications for the AC’ effectiveness, the authors posit an association between the aforementioned financial aspects and AC presence.

Design/methodology/approach

The authors test their hypotheses by performing panel data analysis on a sample of 100 companies listed on the Tehran Stock Exchange (TSE) during 2013-2014. The tests were conducted by using Eviews software.

Findings

Examining previously tested characteristics of an AC, the authors indicate that the number of AC meetings held during fiscal year is negatively associated with the quality of corporate disclosure, whereas AC expertise and size are positively associated with the quality firm’s financial disclosure. Their findings are also indicative of a non-significant relationship between other AC attributes and financial reporting quality (FRQ) except for AC independence, which is positively associated with FRQ. Finally, they provide some evidence that the size of a firm positively affects the quality of its financial reporting and disclosure.

Research limitations/implications

Although the study has been thoroughly considered and cautiously planned, some limitations have yet arisen. Initially, this research was conducted in an Iranian setting where the formation of ACs is on the verge of regulation; therefore, the data utilized for the study only contains the two-year period of ACs’ statutory activity. In addition, a lack of consensus on the precise measures of an AC’s effectiveness could be considered as a restrictive factor.

Originality/value

The authors’ study contributes to the AC literature by providing empirical evidence of an association between ACs’ different attributes and financial aspects in a newly regulated environment like the TSE. The results provided in this paper could be fruitful for auditors, regulators, institutional investors and policymakers.

Details

Management Research Review, vol. 39 no. 12
Type: Research Article
ISSN: 2040-8269

Keywords

Available. Content available
Book part
Publication date: 10 December 2018

Seyed Mohammad Moghimi

Free Access. Free Access

Abstract

Details

Principles and Fundamentals of Islamic Management
Type: Book
ISBN: 978-1-78769-674-7

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