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We examine whether social ties between engagement auditors and audit committee members shape audit outcomes. Although these social ties can facilitate information transfer and help auditors alleviate management pressure to waive correction of detected misstatements, close interpersonal relations can undermine auditors' monitoring of the financial reporting process. We measure social ties by alma mater connections, professor-student bonding, and employment affiliation, and audit quality by the propensity to render modified audit opinions, financial reporting irregularities, and firm valuation. Our evidence implies that social ties between engagement auditors and audit committee members impair audit quality. In additional results consistent with expectations, we generally find that this relation is concentrated where social ties are more salient, or firm governance is relatively poor and agency conflicts are more severe. Implying reciprocity stemming from social networks, we also report some suggestive evidence that audit fees are higher in the presence of social ties between an engagement auditor and the audit committee. Collectively, our analysis lends support to the narrative that the negative implications—namely, worse audit quality and higher audit fees—of these social ties may outweigh the benefits.

Although regulation makes audit committees responsible for determining and negotiating audit fees, researchers and practitioners express concerns that CFOs continue to control these negotiations. Thus, regulation may give investors a false sense of security regarding auditor independence. We utilize the recent financial crisis and economic recession as an exogenous shock that allows us to shed light on the relative influence of the audit committee and the CFO on fee negotiations. During the recession, we find larger fee reductions in the presence of more powerful CFOs, and smaller fee reductions in the presence of more powerful audit committees. We also find the CFO or the audit committee primarily influences fees when their counterpart is less powerful. Our findings suggest a more complex relationship between the CFO and the audit committee than current regulations recognize and cast doubt on the ability of regulation to force one structure on the negotiation process.

This study aims to examine the impact of the characteristics of the audit committee on tax avoidance in Vietnam. The article uses data of non-financial firms listed on the Ho Chi Minh City and Ha Noi Stock Exchange over the period 2010-2019. By using the FEM and SGMM estimation for panel data, the empirical results show how the characteristics of the audit committee affect tax avoidance differently. Specifically, we find that the size of the audit committee has a positive correlation to tax avoidance, while the proportion of female members, financial and accounting experts of the audit committee can constrain tax avoidance behaviors. Our finding provides some important implications for listed firms to enhance the role of the audit committee in constraining tax avoidance behavior.

This study examines the extent of environmental and community disclosures and evaluates how audit committee features influence such disclosures among listed firms in Bahrain and Kuwait, Gulf Cooperation Council (GCC) countries of emerging markets. The research employs an unweighted disclosure index comprising 18 items related to environmental and community disclosures, analyzing 432 firm-year observations across Bahrain and Kuwait covering a nine-year period (2015–2023). Three audit committee features (independence, number of meetings, and size) along with the number of other board committees are examined in this empirical investigation. Descriptive analysis indicates that the sampled firms offer 44.25% and 60.60% of environmental and community information, respectively, signaling a satisfactory disclosure level in Bahrain and Kuwait. This demonstrates progress compared to prior studies in GCC countries. Hierarchical Multiple Regression models demonstrate that all four models significantly describe the dependent variables. Regression model four exhibits the highest explanatory power in explaining community information. Audit committee independence and size emerge as determinants of community information, while only audit committee independence is associated with environmental information. The results of this study bear significant implications for governmental bodies and regulatory authorities aiming to strengthen disclosure regulations and promote corporate governance frameworks within GCC nations.

This study examines the effect of audit committee connectedness through director networks on financial reporting quality, specifically the misstatement of annual financial statements. Using network analysis, we examine multiple dimensions of connectedness and find that after controlling for operating performance and corporate governance characteristics, firms with well-connected audit committees are less likely to misstate annual financial statements. In addition, our study demonstrates that audit committee connectedness through director networks moderates the negative effect of board interlocks to misstating firms on financial reporting quality. We conduct several tests to address identification concerns and find similar results. Our findings suggest that firms with better-connected audit committees are less likely to adopt reporting practices that reduce financial reporting quality. This paper was accepted by Suraj Srinivasan, accounting.

This study investigates the influence of audit committee characteristics on environmental, social, and governance (ESG). This research focuses on countries that are members of the five Southeast Asian countries or ASEAN-5 (Indonesia, Malaysia, Philippines, Singapore and Thailand) for 2018-2023 before, during and after the COVID-19 pandemic. Data were collected via Refinitiv Eikon datastream, and then a purposive sampling method were used to select for this research. 139 sample companies have been selected, or 834 data points for the 2018-2023 period. The data were analyzed using panel data regression techniques with via STATA 17 software. This research has shown that audit committee independence has a significant positive effect on ESG, suggesting that independent oversight enhances a firm’s commitment to sustainable and ethical practicesIn contrast , audit committee expertise does not have a significant effect on ESG, and audit committee tenure does not significantly influence. These results imply that while independence plays a critical role in driving ESG outcomes, the technical expertise and duration of service of audit committee members may not be sufficient indicators of effective ESG oversight within the ASEAN-5 context. The implications of these findings are twofold. First, they underscore the importance for firms and regulators in Southeast Asia to strengthen governance mechanisms by prioritizing the independence of audit committees as a key driver of non-financial performance. Second, the study advocates for the development of regulatory frameworks that emphasize the auditing of non-financial disclosures, particularly ESG metrics, to promote investor confidence and sustainable investment practices. As ESG concerns gain prominence globally, enhancing audit committee structures may prove essential for aligning corporate governance with sustainability goals in emerging markets.

This study examines the effect of female representation on audit fees in listed UK companies, concentrating on the demographic characteristics of female directors, specifically age and nationality. Using a sample of 165 FTSE 350 companies from 2011 to 2021, generalized least squares regression models are employed to test the link between female audit committee members and audit fees from both the demand and supply sides. The results show a negative relationship between the proportion of females on audit committees and audit fees with a coefficient of –0.2273 (p < 0.05). Thus, higher female representation tends to lower audit costs. However, when considering demographic characteristics, the age and nationality of female members have a positive effect on audit costs, with coefficients of 0.0145 (p < 0.01) and 0.5546 (p < 0.01), respectively. Thus, while gender diversity reduces audit costs overall, experienced (older) female directors and those from diverse national backgrounds may add to audit complexity and, therefore, increase fees. The implications of these findings are relevant to policymakers and corporate governance bodies. Diversity policies should go beyond simple gender quotas. Instead, they should include a broader set of demographic attributes when promoting female representation on audit committees to achieve audit quality and cost efficiency. AcknowledgmentThis study received full funding from the Middle East University, Amman, Jordan.

Purpose This paper aims to empirically analyse specific characteristics of an audit committee that could be associated with the likelihood of corporate fraud/scandal/sanctions. Design/methodology/approach The sample includes all firms that were investigated by the Financial Reporting Council through the audit enforcement procedure from 2014 to 2019, and two matched no-scandal firms. It uses logistic binary regression analysis to examine the hypotheses. Findings Results based on the logit regression suggest that audit member tenure and audit committee meeting frequency both have positive associations to the likelihood of corporate scandal. Complementing this result, the authors find negative but insignificant relationships amongst audit committee female chair, audit committee female members percentage, audit committee qualified accountants members, audit committee attendance, number of shares held by audit committee members, audit committee remuneration, board tenure and the likelihood of corporate scandal across the sample. Research limitations/implications The results should help regulatory policymakers make decisions, which could be crucial to future corporate governance. Additionally, these results should be useful to investors who use corporate governance as criteria for investment decisions. Originality/value The authors extend, as well as contribute to the growing literature on the audit committee, and therefore, wider corporate governance literature and provide originality in that it is the first, to the knowledge, to consider two characteristics (i.e. remuneration and gender) in a UK context of corporate scandal. Also, the results imply that the structure and diversity of the audit committee affect corporate fraud/scandal/sanctions.

PurposeThe purpose of this paper is to investigate whether the characteristics of the audit committee (AC) chair affect audit report timeliness. In particular, the direct association between AC chair accounting expertise and audit report delay, and the moderating effect of other characteristics of AC chair on this association are examined.Design/methodology/approachTo achieve the purpose of this study, the characteristics examined by this study are AC chair expertise, shareholding, tenure and multiple directorships. Furthermore, a sample of Malaysian companies during the period 2005–2011 and the fixed effects panel data method are utilized.FindingsThe results suggest that an AC chair with accounting expertise is associated with a reduction in audit delay. The reduction is more obvious when the chair holds shares in the company, but is weakened by longer tenure and multiple directorships. These results are robust after conducting several robust tests. Using mediating analysis, the authors also document that an AC chair with accounting expertise can enhance the timeliness of audit reports even when the quality of financial reporting is lower. The reported result is supported by additional analysis that finds that AC chairs with accounting expertise and AC chairs with accounting expertise and shareholding are significantly associated with shorter abnormal audit delay.Originality/valueThis study provides comprehensive analysis concerning the association between AC chair and audit report timeliness using a unique setting. It is among the limited evidence that reports the moderating effect of AC chair characteristics on the role of such chair on audit report timeliness.

To ensure that audit committees provide sufficient oversight over the auditing process and quality of financial reporting, legislators have imposed stricter requirements on the independence of audit committe members. Although many audit committees appear to be \"fully\" independent, anecdotal evidence suggests that CEOs often appoint directors from their social networks. Based on a 2004 to 2008 sample of U.S.-listed companies after the Sarbanes-Oxley Act, we find that these social ties have a negative effect on variables that proxy for oversight quality. In particular, we find that firms whose audit committees have \"friendship\" ties to the CEO purchase fewer audit services and engage more in earnings management. Auditors are also less likely to issue going-concern opinions or to report internal control weaknesses when friendship ties are present. On the other hand, social ties formed through \"advice networks\" do not seem to hamper the quality of audit committee oversight.