Audit Committee Characteristics and Accounting Conservatism

15 Pages Posted: 5 Jun 2015

See all articles by Nigar Sultana

Nigar Sultana

Curtin University of Technology - Curtin Business School - Bentley Campus; Curtin University - School of Accounting

Date Written: July 2015

Abstract

This study examines the association between four pivotal audit committee characteristics and accounting conservatism. Using a sample of 7,668 Australian firm‐year observations from 2004 to 2012, a positive association is found between accounting conservatism and: (a) a director with financial expertise on the audit committee; (b) an experienced director on the audit committee; and (c) frequency of audit committee meetings. Within an agency theoretical framework, results suggest that audit committees act as effective monitoring mechanisms in restricting management's opportunistic behaviour and overstatement of earnings. Results also suggest that regulators (and other stakeholders) should pay greater attention to the financial expertise, experience of members and meeting frequency of the audit committee when judging the committee's value.

Keywords: Corporate governance, audit committee, conservatism, agency theory

Suggested Citation

Sultana, Nigar and Sultana, Nigar, Audit Committee Characteristics and Accounting Conservatism (July 2015). International Journal of Auditing, Vol. 19, Issue 2, pp. 88-102, 2015, Available at SSRN: https://ssrn.com/abstract=2614732 or http://dx.doi.org/10.1111/ijau.12034

Nigar Sultana (Contact Author)

Curtin University - School of Accounting ( email )

Australia

Curtin University of Technology - Curtin Business School - Bentley Campus ( email )

GPO Box U1987
Perth WA 6845
Australia

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