Features of an effective audit committee, and its role in strengthening the financial reporting: Evidence from Amman Stock Exchange (original) (raw)
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Corporate Ownership and Control, 2012
This study aims to understand the features of an effective audit committee and its role in strengthening financial reporting. A questionnaire based survey was circulated to public listed companies on the Amman Stock Exchange (Banking, insurance, and financial institutions). The study was aimed at internal audit managers and finance managers. Out of 156 questionnaires, we received 110 back which represents a 71% response rate. The study results show that the research respondents have a good level of education and experience. In addition, there is a relationship between internal controls, international standards on auditing, institute of internal audit; Jordan securities commission requirements, external audit, understanding of audit committee functions, and financial reporting. Further more, the internal control, international standard on auditing and institute of internal audit, Jordan securities commission requirements, External audit, understanding of audit committee functions can explain a significant amount of the variability in financial reporting. Finally, the research results also show that age and gender make a difference for our respondents when they evaluate financial reporting. The study like other cross sectional studies is not free of limitations. Managerial implications and new avenues of future research are supplied. Future research also can borrow the research model and apply a longitudinal study to solve the cross sectional study problems.
The Impact of Audit Committee Performance and Composition on Financial Reporting Quality in Jordan
International Journal of Financial Research, 2021
The corporate governance literature indicates efforts to investigate the role of the audit committee (AC) in improving the financial reporting quality (FRQ) after the emergence of financial scandals in many countries in the world, inclusive Jordan. To date, empirical findings are inconclusive enough to address all audit committee characteristics regarding its competency and responsibilities by employing a questionnaire to collect data about this relationship. Thus, this study measures the correlation between AC (performance and composition) and FRQ of manufacturing corporations registered on the Amman Stock Exchange (ASE). To test this impact empirically, the target population was financial managers, audit committee members, and internal audit managers who are working in manufacturing corporations listed on the (ASE). According to the coefficient (β), the independent variables (Audit Committee Performance and Audit Committee Composition influence the dependent variable FRQ. This res...
The Performance of Audit Committees in Jordanian Public Listed Companies
Corporate Ownership and Control, 2015
This study aimed to explore the degree to which audit committees in Jordanian public listed companies possess the necessary characteristics needed to enable them to perform their duties, and the level of their actual performance of these duties. To do so, the study used a questionnaire survey of the views of external auditors with experience in auditing Jordanian public listed companies. The main findings of the study show that audit committees do possess the necessary characteristics needed, but only to a limited extent. In addition, their performance of their duties was also to a limited extent. The study concluded that these findings can be attributed to the family business model dominant in most Jordanian companies, where the demand for effective audit committees is considered low due to limited agency costs involved.
International Business Research, 2017
This study aims to identify the impact of the audit committees' properties on the quality of the information of the banking financial reports in the Saudi commercial banks by identifying the effect of identifying tasks and duties, independence, accounting and banking experience and efficiency of the audit committee on achieving the quality of the Saudi banking and financial reports. 110 questionnaires were distributed on the research sample and 105 questionnaires were received and analyzed through ANOVA. Results indicate that the availability of the audit committees' properties affect increasing the quality of the financial reports in the Saudi banking at the level of properties as a whole where the (P) probable value was (0.000), which is less than 0.05. It represents the functions and duties of the audit committee, the committee's independence in banks, the availability of the accounting and banking experience for the members of the audit committee and the efficiency of the audit committees at banks. The study recommends more emphasis on the diversity of the experiences of the members of the audit team and thus; the committee can performs its functions in a more efficient and effective way.
International Standard on Auditing No. 260 and Audit Quality: Evidence from Jordan
International Business Research, 2019
This study aims to explore the extent of external auditors awareness of the requirements of the International Standard on Auditing No. 260 (Communications with those charged with governance) on audit quality and to shed light on the effectiveness of the communication process based on auditors actual experience. A mixed method approach was employed to achieve the study objectives. The analysis of 116 questionnaires concluded that the requirements of the ISA 260 enhance audit quality, but the two-way communication between Jordanian auditors and the audit committee is ineffective from external auditor"s perception. The study also found that audit committees do not support external auditor when disagreements arise between auditors and their client management on accounting treatments. The qualitative interviews confirmed the quantitative results and revealed several explanations among which: 1) lack of qualified directors, 2) lack of a clear policy in selecting board members, 3) meetings with auditors are routinely held, and 4) insufficient oversight by the securities commission. The interviews also revealed that the recent version of Jordanian corporate governance has two potential factors have been viewed to improve the effectiveness of the communication process that are, the appointment of a "governance liaison officer" who, among other responsibilities, supervise and document audit committee meetings with the auditor, and the use of cumulative voting technique in selecting board members. The findings of the study could be beneficial for regulators by ensuring the best implementation of cumulative voting to increase the representation of qualified members so that the communication process will be greatly enhanced.
THE RELATIONSHIP BETWEEN AUDIT COMMITTEE AND FINANCIAL PERFORMANCE: EVIDENCE FROM IRAQ
IAEME, 2020
The study investigates the relationship of internal control components on the financial performance of the Iraqi banking sector by focusing on the moderating relation of the audit committee. The research theoretical foundation was built based on the agency theories. A quantitative approach using Structural Equation Modelling (SEM) was utilized as the main research design. The data was analysed to determine the relation using SPSS 25 and SmartPLS3 the data was collected from a group of respondents comprising CEO, CFO, accountants, and auditors who were selected through a simple random sampling technique. Exploratory factorial analysis was conducted on 100 respondents in several banks to verify that the research variables that could be used in the actual study. The actual survey questionnaire was distributed to 386 respondents and the data were analysed using a measurement model, the results showed that the audit committee supports the relationship of the control environment, risk assessment, and control activities. While it does not support the relationship of information & communication and monitoring, In conclusion, Audit Committee serves as an influential moderator between internal control components and financial performance. In implication, Banks should focus on Audit Committee to enhance the Components of IC and FP and to Decrease Risks and cases of fraud and theft, which leads to an increase in attracting investors, and consequently, the bank's financial performance improves.
International Journal of Financial Research, 2020
This study aims to investigate the impact of external auditing quality and audit committees on accounting conservatism and the performance of industrial firms listed at the Amman Stock Exchange. The study has relied on the industrial sector which comprised of 70 industrial firms, while the sample size comprised 54 firms. Audit quality has been addressed in terms of audit quality features (communication with world audit offices, keep client period, audit fees, accounting specialist in the customer industry), while audit committees quality has been analyzed (audit committees independence, audit committees expertise, audit committees meetings). The accruals model has been used to measure accounting conservatism. The firm`s performance has been measured through its market value. The study concluded that audit committees have no impact on accounting conservatism and firm`s performance, while audit quality features have a positive impact on accounting conservatism and firm`s performance. The study has recommended the need to activate the role of audit committees in public shareholding industrial firms since they positively have an impact on raising audit efficiency and control the regulate the firm`s internal control system.
A Proposed Model of Audit Committee to Reinforce Corporate Governance System in Jordan
Audit committees are the cornerstone of corporate governance. They play a vital role in overseeing accountability, and work as a liaison between internal auditors, external auditors, executive management and the board of directors. Corporate scandals, such as the demise of Enron-Arthur Andersen in the U.S.A. and Petra Bank in Jordan, have undermined stakeholders' confidence in the capital markets. Such scandals might be caused by the lack of a corporate accountability system and by management pressure exerted on audit scope or the auditor's fee. These scandals imply a message that relying on the perceived independence of external auditors may not be sufficient and, therefore, corporate governance systems must be restructured because financial collapses may harm society and cost the government both economically and socially. This analytical research paper proposes and outlines a model of audit committee to reinforce the effectiveness of the corporate governance structure. The study recommends a Governmental Representative Member (GRM), appointed and supervised by the Audit Bureau, to be among the audit committee members of listed companies. The study model suggests that the presence of the GRM among audit committee members strengthens their effectiveness and, therefore, reinforces external auditors' independence, performance, and their ability to operate in the face of pressure from company management to issue a favourable audit opinion, thus, increasing the integrity and the soundness of the financial reporting system.
Social Science Research Network, 2012
The objective of this paper is to investigate the relationship between audit committee characteristics (namely: audit committee size, financial experience, and audit committee independence) on performance, which includes financial, operating and stock performance. The study sample contained 106 corporations from the financial sector listed in the Amman Stock Exchange Market with a total of 212 observations during the 2008-2009 sample years. The results showed that the audit committee has an impact on financial and stock performance. It does not have an effect on operating performance.
Universal Journal of Accounting and Finance, 2022
This study examines the influence of audit committee characteristics on voluntary disclosure of non-financial firms considering the context of Amman stock exchange (ASE). As a result, a total number of 140 firms were annually considered as study samples between 2015 and 2019 making up to 4 years reports. To measure the impacts of audit committee on information of voluntary disclosure, a number of hypotheses were tested from selected firms listed in Jordan. On the test for hypotheses, a descriptive analysis was carried out followed by the model of multiple regressions. The outcome from the findings in this study however indicated a positive relationship between the factors of independent audit committee, the sizes, the multiple directorships of members of audit committee and the corporate voluntary disclosure. The rate at which meetings were held by financial expertise and members of audit committee was observed to be associated significantly with the corporate voluntary disclosure. The results further revealed a strong significance difference between investors in accounting sector and policy makers and the accuracy of monitoring the process of corporate reporting. The current research however projected foresight ideas to improve corporate governance of Jordan and other developing countries with the tendency of imposing reliable regulation bodies.