The Impact of Audit Committee Composition and Performance on Financial Reporting Quality in Kurdistan’s Industrial Companies

Sardar Jalal Braim; Rebin Bilal Mohammed

doi:10.25212/lfu.qzj.7.4.42

Authors

Sardar Jalal Braim Department of Accounting & Finance, College of Adminstration and Economics, Lebanese French University, Erbil, Kurdistan Region, Iraq
Rebin Bilal Mohammed Department of Accounting & Finance, College of Adminstration and Economics, Lebanese French University, Erbil, Kurdistan Region, Iraq

DOI:

https://doi.org/10.25212/lfu.qzj.7.4.42

Keywords:

Audit committee, audit composition, audit performance, financial reporting quality,

Abstract

Given the high prevalence of corporate fraud and misconduct worldwide, the demand for financial reporting quality has also been on a high rise. Among the suggested courses of action is audit committee composition and performance. Consequently, the study examines the impact of audit committee composition and performance on financial reporting quality using 277 responses collected from 140 internal audit managers, 120 audit committee members and 17 financial managers of five strategic industries in Erbil, Kurdistan. The responses were regressed using two single regression analysis models with the aid of SPSS version 24. The findings of the study indicated that improvements in both audit committee composition and performance have significant positive effects on financial reporting quality. The study’s theoretical underpinnings are engraved in suggesting that the principal-agent theory’s propositions can be improved by having sound audit committees capable of performing exceptionally well so as to improve financial reporting quality. The study’s practical contributions are linked to its capacity in highlighting that industrial companies must be cautious when selecting audit committee members

Downloads

Download data is not yet available.

References

Abbott, L. J., & Parker, S. (2000). The effects of audit committee activity and independence on corporate fraud. Managerial Finance, 26, 55-67.

Abdullah, W. Z. W., Ismail, S., & Jamaluddin, N. (2016). The impact of board composition, ownership and CEO duality on audit quality: The Malaysian evidence. Malaysian Accounting Review, 7(2).

Alawaqleh, Q. A., & Almasria, N. A. (2021). The Impact of Audit Committee Performance and Composition on Financial Reporting Quality in Jordan. International Journal of Financial Research, 12(3), 55-69.

Al-Hajaya, K. (2019). The Impact of Audit Committee Effectiveness on Audit Quality: Evidence from the Middle East. International Review of Management and Marketing, 9(5), 1. https://doi.org/10.32479/irmm.8341.

Alkilani, S. Z., Hussin, W. N. W., & Salim, B. (2019). The Influence of Audit Committee Characteristics on Modified Audit Opinion in Jordan. Journal of Finance and Accounting, 7(3), 95-106.

Allwood, C. M. (2012). The distinction between qualitative and quantitative research methods is problematic. Quality & Quantity, 46(5), 1417-1429.

Alqatamin, R. M. (2018). Audit committee effectiveness and company performance: Evidence from Jordan. Accounting and Finance Research, 7(2), 48.

Apriliana, S., & Agustina, L. (2017). The analysis of fraudulent financial reporting determinant through fraud pentagon approach. Jurnal Dinamika Akuntansi, 9(2), 154-165.

Apuke, O. D. (2017). Quantitative research methods: A synopsis approach. Kuwait Chapter of Arabian Journal of Business and Management Review, 33(5471), 1-8.

Arghode, V. (2012). Qualitative and Quantitative Research: Paradigmatic Differences. Global Education Journal, 2012(4).

BRAIM, S. J. (2020),THE ROLE OF MANAGEMENT ACCOUNTING IN THE DECISION-MAKING PROCESS.

Daga, D. (2020). OP 5 Fraud Cases Of 2019: Looking Back. Retrieved from https://avianaglobal.com/top-5-fraud-cases-of-2019-looking-back/ on 18 December 2021.

Donelson, D. C., Ege, M. S., & McInnis, J. M. (2017). Internal control weaknesses and financial reporting fraud. Auditing: A Journal of Practice & Theory, 36(3), 45-69.

Emerson, R. W. (2015). Convenience sampling, random sampling, and snowball sampling: How does sampling affect the validity of research?. Journal of Visual Impairment & Blindness, 109(2), 164-168.

Etikan, I., Musa, S. A., & Alkassim, R. S. (2016). Comparison of convenience sampling and purposive sampling. American journal of theoretical and applied statistics, 5(1), 1-4.

Fortune Editors. (2020). Retrieved from https://fortune.com/2020/12/27/biggest-business-scandals-of-2020-nikola-wirecard-luckin-coffee-twitter-security-hack-tesla-spx-mcdonalds-ceo-ppp-fraud-wells-fargo-ebay-carlos-ghosn/ on 18 December 2021.

Foss, N., & Stea, D. (2014). Putting a realistic theory of mind into agency theory: Implications for reward design and management in principal‐agent relations. European Management Review, 11(1), 101-116.

Gailmard, S. (2012). Accountability and principal-agent models. Chapter prepared for the Oxford Handbook of Public Accountability.

Habib, A., & Bhuiyan, M. B. U. (2016). Problem directors on the audit committee and financial reporting quality. Accounting and Business Research, 46(2), 121-144.

Hamad, K. Q., Qader, K. S., & Sharif, R. J. M. (2021). Effectiveness And Adequacy Of Disclosure Provisions In Tehran Stock Exchange. PalArch's Journal of Archaeology of Egypt/Egyptology, 18(08), 2379-2388.

Hasan, S., Kassim, A. A. M., & Hamid, M. A. A. (2020). The impact of audit quality, audit committee and financial reporting quality: evidence from Malaysia. International Journal of Economics and Financial Issues, 10(5), 272.

Heo, M., Kim, N., & Faith, M. S. (2015). Statistical power as a function of Cronbach alpha of instrument questionnaire items. BMC medical research methodology, 15(1), 1-9.

Kamel, H., & Elkhatib, S. (2013). The perceptions of audit committees’ role in an emerging market: The case of Egypt. Journal of Economic and Administrative Sciences, 29(2), 85-98.

Kantudu, A. S., & Samaila, I. A. (2015). Board Characteristics, Independent Audit Committee and Financial Reporting Quality of Oil Marketing Firms: Evidence from Nigeria. Journal of Finance, Accounting & Management, 6(2).

Khan S.I (2021). Impact of spirituality at workplace on organizational commitment in private banks of Nagpur, India. Entrepreneur’s Guide, 14(4), 184-189.

Khan S. I and Nawzad N.A (2019). The Effect of Atm Service Quality on Customer’s Satisfaction And Loyalty: An Empirical Analysis. Russian Journal of Agricultural and Socio-Economic Sciences, 5 (89), 227 – 235.

Mardessi, S. (2021). Audit committee and financial reporting quality: the moderating effect of audit quality. Journal of Financial Crime. 29 (1), 368-388.

Nazari, H., & Soukhakyan, I. (2020). Characteristics of the Chairman of Audit Committee and Timely Financial Reporting. Journal of Knowledge Accounting, 11(3), 131-165.

Ngo, T. H. D., & La Puente, C. A. (2012, April). The steps to follow in a multiple regression analysis. In SAS Global forum (Vol. 2012, pp. 1-12).

Rezaee, Z., & Davani, H. (2013). Does financial reporting fraud recognize borders? Evidence from bank fraud in Iran. Journal of Forensic & Investigative Accounting, 5(2).

Shatnawi, S., Hanefah, M., Adaa, A., & Eldaia, M. (2019). The Moderating Effect of Enterprise Risk Management on the Relationship between Audit Committee Characteristics and Corporate Performance: A Conceptual Case of Jordan. International Journal of Academic Research Business and Social Sciences, 9(5). https://doi.org/10.6007/IJARBSS/v9-i5/5849.

Soliman, M. M., & Ragab, A. A. (2014). Audit committee effectiveness, audit quality and earnings management: An empirical study of the listed companies in Egypt. Research Journal of Finance and Accounting, 5(2), 155-166.

Song, J., & Windram, B.(2004). Benchmarking audit committee effectiveness in financial reporting. International Journal of Auditing, 8(3), 195-205.

Steinberg, R. (2008). Principal-agent theory and nonprofit accountability (No. wp200803).

Suen, L. J. W., Huang, H. M., & Lee, H. H. (2014). A comparison of convenience sampling and purposive sampling. Hu Li Za Zhi, 61(3), 105.

Sultan, K., Ahmed, R. R., Jafar, R., Murtaza, M. M., & Gardi, B. (2020). Corporate financial policy and its impact on sustainable capital structure: empirical evidence from textile firms of pakistan. Humanities & Social Science Review, 149-158.

Umobong, A. A., & Ibanichuka, E. A. L. (2017). Audit committee attributes and financial reporting quality of food and beverage firms in Nigeria. International Journal of Innovative Social Sciences and Humanities Research, 5(2), 1-13.

Uyanık, G. K., & Güler, N. (2013). A study on multiple linear regression analysis. Procedia-Social and Behavioral Sciences, 106, 234-240.