Effect Of Audit Committee Financial Competence On Quality Of Financial Reporting Among Non-Commercial State Corporations In Kenya
DOI:
https://doi.org/10.14738/abr.610.5386Abstract
The purpose of this research was to establish the effect of audit committee financial competence on quality of financial reporting in non-commercial state corporations in Kenya. The research was founded on agency theory, lending credibility theory and theory of inspired confidence. Empirical evidence on influence of audit committee financial competence on quality of financial reporting was reviewed analysed and research gaps identified. The research adopted descriptive research design and the target population was the seventy two non-commercial state corporations that existed subsequent to the introduction of The National Treasury guidelines in 2005 on formation and operationalization of audit committees in the public sector in Kenya. Descriptive statistics used in presentation of findings include frequencies, mean and standard deviation, while inferential statistics used are correlation and regression analysis. Regression analysis was employed to measure the relationship between dependent and independent variables. The findings from both correlation and regression analysis revealed that audit committee financial competence had a statistically significant relationship with the quality of financial reporting. The results revealed that audit committee financial competence reduced the ratio of queried transactions to annual budget of non-commercial state corporations in Kenya. From the findings, the research concluded that members of audit committees of non-commercial state corporations should have some level of financial competence in order to enhance the quality of their financial reporting and that audit committees should consist of members with knowledge in accounting and finance which provides a good basis for audit committee members to examine and analyse financial information.
References
Agung, M. (2015). Internal Control Part of Fraud Prevention in Accounting Information System. International Journal of Economics, 724-737.
Alchian, A. A. & Demsetz, H. (1972). Production, information costs, and economic organization. The American economic review, 62(5), 777-795.
Bastida, F. & Benito, B. (2007). Central government budget practices and transparency: an international comparison. Public Administration, 85(3), 667-716.
Bedard, J. Chtourou, S. M. & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: A Journal of Practice & Theory, 23(2), 13-35.
Bushman, R. M. & Piotroski, J. D. (2006). Financial reporting incentives for conservative accounting: The influence of legal and political institutions. Journal of Accounting and Economics, 42(1), 107-148.
Carcello, J. V. Hollingsworth, C. W. Klein, A. & Neal, T. L. (2006). Audit committee financial expertise, competing corporate governance mechanisms, and earnings management.
Chang, H. Chen, X. & Zhou, N. (2013). Determinants and Consequences of Audit Committee Effectiveness: Evidence from China.
DeZoort, F. T. Hermanson, D. R. Archambeault, D. S. & Reed, S. A. (2002). Audit committee effectiveness: A synthesis of the empirical audit committee literature. Journal of accounting literature, 21.
FASB (1999): Qualitative Characteristics of Accounting Information. Statement of
Fox, J. (1991). Regression diagnostics: An introduction (Vol. 79). Sage. Financial Accounting Concepts No. 2
Ghafran, C. (2013). Audit committees and financial reporting quality Unpublished PhD dissertation, Sheffield: University of Sheffield.
Hayes, S. C. Strosahl, K. D. & Wilson, K. G. (1999). Acceptance and commitment therapy: An experiential approach to behavior change. Guilford Press.
Huang, H. W. Yan, Y. C., Fornaro, J. M., & Elshahat, A. (2011). Market reactions to audit committee director's gender: Evidence from US-traded foreign firms. International Journal of Banking and Finance, 8(1), 4.
IASB. (2008). Exposure Draft on an improved Conceptual Framework for Financial Reporting, IASB.
ICPAK, (2015) A Survey Report on the Effectiveness of Audit Committees in Kenya’s Public Sector, Nairobi: ICPAK.
Kabiru, I. D. & Rufai, A. S. (2014). An examination into the Quality of Audited Financial Statements of Money Deposit Banks in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 145-156.
Kombo, D. K. & Tromp, D.L.A. (2009) Proposal and Thesis Writing: An Introduction. Nairobi:. Paulines Publications Africa
Kothari, C. (2014). Research Methodology, Methods and Techniques. Third Edition, New Delhi, New Age International (P) Limited Publishers.
Madawaki, A., & Amran, N. A. (2013). Audit committees: How they affect financial reporting in Nigerian companies. Journal of Modern Accounting and Auditing, 9(8), 1070.
Miringu A.N, & Muoria E.T (2011), An Analysis of the Effect of Corporate Governance on performance of commercial state corporations in Kenya.International Journal of Business and Management.
Moses, T., Ofurum, C., & Egbe, D. S. (2014) Audit committee financial competence And Quality Of Financial Reporting In Quoted Nigerian Banks.
Nayeri, N., & Salehi, M. (2013). Agency Costs in Islamic Countries: Evidence from Iran. IUP Journal of Accounting Research & Audit Practices, 12(2).
Orodho, A. J. (2003). Essentials of Educational and Social Science Research Method.
Salehi, M., Salehi, M., Shirazi, M., & Shirazi, M. (2016). Audit committee impact on the quality of financial reporting and disclosure: Evidence from the Tehran Stock Exchange. Management Research Review, 39(12), 1639-1662. Sarbanes-Oxley Act 2002: Public Law 107-204:USA, US Senate.
Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and practices. USA: Oxford University Press.
Van Beest, F. Braam, G., & Boelens, S. (2009). Quality of Financial Reporting: measuring qualitative characteristics. Nijmegen Center for Economics (NiCE). Working Paper, 09-108.
Wakaba, R. (2014). Effect of audit committee financial competence on financial performance of companies listed at the Nairobi securities exchange Unpublished PhD Thesis, Nairobi: University of Nairobi.
Wang, J. & Dudley, H. D. (1992). Boards of directors and stakeholder orientation. Journal of business ethics, 11(2), 115-123.
Wong, G. (2012). An analysis of the role and performance of audit committees in the Victorian government public sector in providing assurance and governance (Doctoral dissertation, Victoria University).
Xie, B., Davidson, W. N., & DaDalt, P. J. (2003). Earnings management and corporate governance: the role of the board and the audit committee. Journal of corporate finance, 9(3), 295-316.
Zábojníková, G. (2016). The Audit committee financial competence and Firm Performance: Evidence from the UK.
Zheng, X. (2010). A Comparative Research Of Financial Reporting Quality. Journal of corporate finance, 9(3), 295-
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2018 Archives of Business Research
This work is licensed under a Creative Commons Attribution 4.0 International License.
