CEO involvement in selecting CAE, internal audit competency and independence, and financial reporting quality
The purpose of this study is to explore the argument that Chief Executive Officer (CEO) involvement in the appointment of the Chief Auditing Executive (CAE) is detrimental to efforts to achieve good financial reporting quality (FRQ). The study is original in that to date, this precise link has not b...
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| Format: | Article |
| Language: | English |
| Published: |
Vilnius Gediminas Technical University
2018-11-01
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| Series: | Journal of Business Economics and Management |
| Subjects: | |
| Online Access: | https://journals.vgtu.lt/index.php/JBEM/article/view/6264 |
| _version_ | 1818913925605883904 |
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| author | Abdulaziz Alzeban |
| author_facet | Abdulaziz Alzeban |
| author_sort | Abdulaziz Alzeban |
| collection | DOAJ |
| description | The purpose of this study is to explore the argument that Chief Executive Officer (CEO) involvement in the appointment of the Chief Auditing Executive (CAE) is detrimental to efforts to achieve good financial reporting quality (FRQ). The study is original in that to date, this precise link has not been investigated. Data are obtained via survey and annual reports relating to 307 UK companies listed on the London Stock Exchange, and the working capital and discretionary accruals are used as proxies for financial reporting quality. The findings support the contention that the benefits to FRQ of an independent and competent internal audit function are not realized when there is CEO involvement in the appointment of the CAE, since management is able to override IA controls. Indeed, high FRQ is only evident when the CEO is not involved in the appointment. The results are found to be robust after using two different methods of estimation, and carry the implication regulators concerned with FRQ and quality of internal audit function that the CEO should not be party to the appointment of the CAE since this will depress FRQ. |
| first_indexed | 2024-12-19T23:38:14Z |
| format | Article |
| id | doaj.art-f997e748d1144466b0adc9bd534fa0b9 |
| institution | Directory Open Access Journal |
| issn | 1611-1699 2029-4433 |
| language | English |
| last_indexed | 2024-12-19T23:38:14Z |
| publishDate | 2018-11-01 |
| publisher | Vilnius Gediminas Technical University |
| record_format | Article |
| series | Journal of Business Economics and Management |
| spelling | doaj.art-f997e748d1144466b0adc9bd534fa0b92022-12-21T20:01:32ZengVilnius Gediminas Technical UniversityJournal of Business Economics and Management1611-16992029-44332018-11-0119310.3846/jbem.2018.6264CEO involvement in selecting CAE, internal audit competency and independence, and financial reporting qualityAbdulaziz Alzeban0Business Department, Community College, King Abdulaziz University, Jeddah, Saudi ArabiaThe purpose of this study is to explore the argument that Chief Executive Officer (CEO) involvement in the appointment of the Chief Auditing Executive (CAE) is detrimental to efforts to achieve good financial reporting quality (FRQ). The study is original in that to date, this precise link has not been investigated. Data are obtained via survey and annual reports relating to 307 UK companies listed on the London Stock Exchange, and the working capital and discretionary accruals are used as proxies for financial reporting quality. The findings support the contention that the benefits to FRQ of an independent and competent internal audit function are not realized when there is CEO involvement in the appointment of the CAE, since management is able to override IA controls. Indeed, high FRQ is only evident when the CEO is not involved in the appointment. The results are found to be robust after using two different methods of estimation, and carry the implication regulators concerned with FRQ and quality of internal audit function that the CEO should not be party to the appointment of the CAE since this will depress FRQ.https://journals.vgtu.lt/index.php/JBEM/article/view/6264internal auditfinancial reporting qualityCEOinternal audit competencyinternal audit independencechief audit executive |
| spellingShingle | Abdulaziz Alzeban CEO involvement in selecting CAE, internal audit competency and independence, and financial reporting quality Journal of Business Economics and Management internal audit financial reporting quality CEO internal audit competency internal audit independence chief audit executive |
| title | CEO involvement in selecting CAE, internal audit competency and independence, and financial reporting quality |
| title_full | CEO involvement in selecting CAE, internal audit competency and independence, and financial reporting quality |
| title_fullStr | CEO involvement in selecting CAE, internal audit competency and independence, and financial reporting quality |
| title_full_unstemmed | CEO involvement in selecting CAE, internal audit competency and independence, and financial reporting quality |
| title_short | CEO involvement in selecting CAE, internal audit competency and independence, and financial reporting quality |
| title_sort | ceo involvement in selecting cae internal audit competency and independence and financial reporting quality |
| topic | internal audit financial reporting quality CEO internal audit competency internal audit independence chief audit executive |
| url | https://journals.vgtu.lt/index.php/JBEM/article/view/6264 |
| work_keys_str_mv | AT abdulazizalzeban ceoinvolvementinselectingcaeinternalauditcompetencyandindependenceandfinancialreportingquality |