The Effect of Corporate Governance Mechanisms on the Quality of Financial Statements and Its Reflection on the Type of Auditor's Opinion
Article Sidebar
THIS IS AN OPEN ACCESS ARTICLE UNDER THE CC BY LICENSE
Main Article Content
Abstract
Corporate governance has become an important topic after the financial crises that occurred in many companies and led to their collapse in the nineties of the twentieth century, and technological developments affected accounting and the appropriateness of financial reports. Many corporations used corporate governance concepts to acquire the trust of investors who value transparency and information sharing. The goal of this research is to look at the impact of corporate governance structures on financial reports quality and how it relates to the type of external auditor. The findings of the study show that institutional shareholder ownership has a positive and significant link with financial report quality, and that the auditor's view diminishes the relationship between institutional shareholder ownership and financial report quality. The study concluded that managers' ownership has a positive and important relationship with the quality of financial reports, and the auditor's statement has no effect on the relationship between managers' ownership and the quality of financial reports. The structure of the board of directors has a positive and important relationship with the quality of financial reports, and the auditor's statement has no effect on the relationship between the structure of the board and the quality of financial reports. Finally, the size of the council has a positive and important relationship. The auditor's comments reduce the relationship between board size and the quality of financial reporting.
Downloads
Article Details
References
Agrawal, A., & Chadha, S., (2005), Corporate Governance and Accounting Scandals. Journal of Law and Economics, 43(2), 371-406.
Ahmad, S. M., Bakar, R., & Islam, M. A., (2021, May), Capital structure choice, industry classification and firm value: Evidence from emerging market. In AIP Conference Proceedings (Vol. 2339, No. 1, p. 020111). AIP Publishing LLC.
Ali, K.S., Mohaisen, H.A., Hameed, A.A., (2019), Joint Audit and the Financial Reporting Quality: Empirical Study on Iraqi Voluntary Joint Audits, International Journal of Innovation, Creativity and Change, 7 (8), 343-359.
Beasley, M., (1996), An Empirical Analysis of the Relation between the Board of Director Composition and Financial Statement Fraud. The Accounting Review, 71(4), 443-464.
Bebchuck, L., Cohen, A., (2004), The costs of entrenched boards. Working Paper. Harvard Law School. 409-433.
Beyer, A., Cohen, D. A., Lys, T. Z., & Walther, B. R., (2010), The financial reporting environment: Review of the recent literature. Journal of accounting and economics, 50(2-3), 296-343.
Blue Ribbon Committee, (1999), Report and Recommendations of the Blue-Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees. New York: New York Stock Exchange and National Association of Securities Dealers.
Bushman, R. M., & Smith, A. J., (2003), Transparency, financial accounting information, and corporate governance. Financial accounting information, and corporate governance. Economic Policy Review, 9(1).
Byard, D., Li, Y., & Weintrop, J., (2006), Corporate governance and the quality of financial analysts' information. Journal of Accounting and Public Policy, 25(5), 609-625.
Carcello, J., & Neal, T.L., (2000), Audit committee composition and auditor reporting. The Accounting Review, 75(4), 453-468.
Dechow, P. M., Sloan, R.G., & Sweeney, A.P., (1996), Detecting Earnings Management. The Accounting Review, 70(2), 193 -225.
Francis, J., Olsson, P., & Schipper, K., (2008), Earnings Quality. Foundations and Trends® in Accounting, 1(4), 259-340.
Healy, P.M., Palepu, K.G. and Ruback, R.S., (1992), Does Corporate Performance Improve After Mergers? Journal of Financial Economics, 31(2), 135-175
Hussein, A. I. (2019). Improve the financial reporting quality Using Information Technology Balanced Scorecard (IT-BSC)/An Empirical Study in Iraq. Tikrit Journal of Administration and Economics Sciences, 15(48 part 1).
International Accounting Standards Board, (2010), The Conceptual Framework for Financial Reporting, 30 Cannon Street, London EC4M 6XH, United Kingdom.
Jian, M., & Wong, T. J., (2010), Propping through related party transactions. Review of Accounting Studies, 15(1), 70-105.
Klein, A., (2002), Audit Committee, Board of Director Characteristics, and Earnings Management. Journal of Accounting and Economics, 33(3), 375-400.
Krishnan, J., (2001), Corporate governance and internal control: An empirical analysis. American Accounting Association Annual Meeting. Atlanta, Georgia.
Krugman, P., (2002), The insider game. New York Times (July 12).
Larcker, D., Richardson, S., & Tuna, I., (2004), Does corporate governance really matter? Working paper, The Wharton School.
Levitt, Jr, A., (1998), The numbers game. The CPA Journal, 68(12), 14-19.
Loomis, C.J., (1999), Lies, damned lies, and managed earnings. Fortune (August 2).
Maher, M., & Andersson, T., (2002), Corporate governance: effects on firm performance and economic growth. Convergence and Diversity in Corporate Governance Regimes and Capital Markets, Oxford University Press, Oxford, 386-420.
Meteb, A. M., (2015), The importance of corporate governance in Saudi Arabia economy. Journal of WEI Business and Economics, 4(1), 14-27.
McMullen, D. A., (1996), Audit committee performance: An investigation of the consequences associated with audit committees. Auditing, 15(1), 87.
Mohaisen, H.A., Al-Abedi, T.K., Saeed, H.S., (2021), The Impact of Accounting Disclosure According to Integrated Business Reports on the Value of the Company and the Cost of Capital: An Empirical Study in Iraq Stock Exchange. Webology. 18(Special Issue), pp. 328-351
Moustafa, S. & Abd Elsalam, M., (2012), Corporate Governance Practices and Audit Quality: An Empirical Study of the Listed Companies in Egypt. World Academy of Science, Engineering and Technology, 71(1): 1292- 1297.
Nasman, Ibrahim Isaac, (2009), The role of internal audit departments in activating the principles of governance. Master's Thesis in Accounting, Faculty of Commerce, Islamic University - Gaza.
Nikbakht, Mohammad Reza; Beigi, Mustafa Ahmad Khan, (2018), The Impact of Corporate Governance on the Quality of Financial Reporting: An Integrated Approach, Quarterly Journal of Accounting and Auditing Reviews, Volume 25, Number 3, pp. 433-455.
OECD Principles of Corporate Governance, (2004), Organization for economic co-operation and development. Principe's degouvernement d’entreprise de l’OCDE publication. Paris, France.
Palmrose, Z., Scholz, S., (2002), The accounting causes and legal consequences of non-GAAP Reporting: Evidence from restatements. Contemporary Accounting Research Conference. (November).
Petra, S., (2007), The effects of Corporate Governance on the Effectiveness of Earnings. Economics of Governance, 8, 129-152.
Rindfleisch, A., (2020), Transaction cost theory: past, present and future. AMS Review, 10(1), 85-97.
Sarbanes, P., & Oxley, M., (2002), Sarbanes -Oxley Act of 2002. Washington, DC: U.S.Congress.
Shahab, S., & Viallon, F. X., (2019), A transaction-cost analysis of Swiss land improvement syndicates. Town Planning Review, 90(5), 545-566.
Shahi, Reza; Zeinali, Mehdi; Amir Azad, Mir Hafez, (2014), Study of the Impact of Corporate Governance Mechanisms on the Selection of the Auditor's Opinion, Fourteenth Year, No. 57, Auditing Knowledge.
Van der Laan, G., Van Ees, H., & Van Witteloostuijn, A., (2008), Corporate social and financial performance: An extended stakeholder theory, and empirical test with accounting measures. Journal of Business Ethics, 79(3), 299-310.
Wu, M., (2002), Earnings restatements: A capital market perspective. Working paper, New York University.