Audit committee characteristics and quality of unaudited financial accounts

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Date
2007
Authors
Saidatunur Fauzi, Saidin
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Abstract
Since financial reporting is widely used in the process of making economic decision, it is vital for financial reporting to provide the truthfulness of information. Meanwhile, an audit committee which is discharged with the responsibility in reviewing the financial accounts is expected to ensure the accuracy of these financial accounts. Thus, besides of just examining the occurrences of variations between earnings in unaudited yearend financial account and audited annual account, this study also examines the effects of audit committee characteristics on these variations. By using 261 sample companies listed on the Bursa Malaysia in 2004, it was found that 64-percent of companies do have variations in their financial accounts. The occurrences of these variations have raised questions regarding the quality of quarterly accounts produced. The results of the multivariate analysis provide support for the effect of audit committee characteristics on earnings variations, whereby audit committees with greater number of average directorship holdings in other companies and a higher number of members were found to be positively associated with nonvariations financial accounts. These results add to the growing literature on the relationship between audit committee characteristics and financial reporting quality.
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Master
Keywords
Accounting , Audit committee characteristic
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