Audit committee compensation, best practices and audit fees
Background: It is extremely important that an audit committee (AC) monitors a company’s financial reporting process, and that the committee engages a high-quality auditor to carry this out effectively. Prior research on ACs has paid much attention to the relationship between AC best practices and au...
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| Format: | Article |
| Language: | English |
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AOSIS
2019-09-01
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| Series: | South African Journal of Business Management |
| Subjects: | |
| Online Access: | https://sajbm.org/index.php/sajbm/article/view/1293 |
| _version_ | 1828498484999749632 |
|---|---|
| author | Bum-Jin Park |
| author_facet | Bum-Jin Park |
| author_sort | Bum-Jin Park |
| collection | DOAJ |
| description | Background: It is extremely important that an audit committee (AC) monitors a company’s financial reporting process, and that the committee engages a high-quality auditor to carry this out effectively. Prior research on ACs has paid much attention to the relationship between AC best practices and audit fees (AF). Although compensation is a means of aligning interests between ACs and stakeholders, previous studies have neglected the complementary interaction between AC compensation and compliance with best practices on audit quality.
Objectives: The purpose of this study is to investigate how compensation for ACs affects AF, and how the association is moderated by compliance with best practices to capture effective monitoring.
Method: The regression models are estimated to verify how the relationship between AC compensation and AF is moderated by AC compliance with best practice. Moreover, the logistic regression models are used to investigate how the relationship between AC compensation and the opportunistic achievement of earnings goals is moderated by AC compliance with best practice.
Results: The findings show a positive association between the levels of compensation AC members receive and AF, which is reinforced in firms that have ACs that comply with all best practices.
Conclusion: The results suggest that highly paid ACs engage high-quality auditors to complement their function of monitoring management and AC compensation and compliance with best practices are complementary to enhance audit quality. This study thus provides the interesting insights that can be applicable to countries with requirements relating to the compensation schemes for ACs or the formation of the AC. |
| first_indexed | 2024-12-11T13:06:53Z |
| format | Article |
| id | doaj.art-07408049f9234d8ba3a3e52bd8fd157c |
| institution | Directory Open Access Journal |
| issn | 2078-5585 2078-5976 |
| language | English |
| last_indexed | 2024-12-11T13:06:53Z |
| publishDate | 2019-09-01 |
| publisher | AOSIS |
| record_format | Article |
| series | South African Journal of Business Management |
| spelling | doaj.art-07408049f9234d8ba3a3e52bd8fd157c2022-12-22T01:06:16ZengAOSISSouth African Journal of Business Management2078-55852078-59762019-09-01501e1e1110.4102/sajbm.v50i1.12931024Audit committee compensation, best practices and audit feesBum-Jin Park0Department of Business Administration, Soonchunhyang University, Asan, South KoreaBackground: It is extremely important that an audit committee (AC) monitors a company’s financial reporting process, and that the committee engages a high-quality auditor to carry this out effectively. Prior research on ACs has paid much attention to the relationship between AC best practices and audit fees (AF). Although compensation is a means of aligning interests between ACs and stakeholders, previous studies have neglected the complementary interaction between AC compensation and compliance with best practices on audit quality. Objectives: The purpose of this study is to investigate how compensation for ACs affects AF, and how the association is moderated by compliance with best practices to capture effective monitoring. Method: The regression models are estimated to verify how the relationship between AC compensation and AF is moderated by AC compliance with best practice. Moreover, the logistic regression models are used to investigate how the relationship between AC compensation and the opportunistic achievement of earnings goals is moderated by AC compliance with best practice. Results: The findings show a positive association between the levels of compensation AC members receive and AF, which is reinforced in firms that have ACs that comply with all best practices. Conclusion: The results suggest that highly paid ACs engage high-quality auditors to complement their function of monitoring management and AC compensation and compliance with best practices are complementary to enhance audit quality. This study thus provides the interesting insights that can be applicable to countries with requirements relating to the compensation schemes for ACs or the formation of the AC.https://sajbm.org/index.php/sajbm/article/view/1293Audit committee best practiceaudit feesaudit committee compensationearnings goalsagency theory. |
| spellingShingle | Bum-Jin Park Audit committee compensation, best practices and audit fees South African Journal of Business Management Audit committee best practice audit fees audit committee compensation earnings goals agency theory. |
| title | Audit committee compensation, best practices and audit fees |
| title_full | Audit committee compensation, best practices and audit fees |
| title_fullStr | Audit committee compensation, best practices and audit fees |
| title_full_unstemmed | Audit committee compensation, best practices and audit fees |
| title_short | Audit committee compensation, best practices and audit fees |
| title_sort | audit committee compensation best practices and audit fees |
| topic | Audit committee best practice audit fees audit committee compensation earnings goals agency theory. |
| url | https://sajbm.org/index.php/sajbm/article/view/1293 |
| work_keys_str_mv | AT bumjinpark auditcommitteecompensationbestpracticesandauditfees |