Effect of Corpora te Governance and BOD Characteristics on Financial statements and Auditor Change in Future Financial Period

Rasool Yarifard; Ye JianMu; Alireza Saber

Rasool Yarifard Wuhan University of Technology, Wuhan, China
Ye JianMu Wuhan University of Technology, Wuhan, China
Alireza Saber

Keywords: Restatement of Financial Statements, Ownership Concentration, Influence Managers, auditor Change, Auditor Select, Corporate Governance

Abstract

This study has been analyzedrelationship between corporate governanceand BOD (board of directors) characteristics on financial statements and auditor change in future financialperiod. In this study, auditor tenure criterion and auditor change has been used as a basis for measuring audit quality and ownershipconcentration and lack of manager’sinfluence on the board variables has been consideredas indicators to measure the strength and weaknessof corporate governance. variables used in this study has been calculated the financial reports of listed companies in Tehran Stock Exchange in the period 2005-2015 (the eventperiod) with the software Excel 2016 and 86 companies data during 2008 -2015 (the review) using Eviews six econometricsoftware and panel data estimation method inregression models of bainary logit has been analyzed. Research results show that significant relationship was not observed in the first hypothesis test between ownership concentrationand selected audit institution in terma of audit quality. Also,significant relationship was not observed in the fourth hypothesis between ownership concentrationand the restated financial statements in the next year. But positive and significant relationship wasobserved in the second hypothesis, between the lack of manager’sinfluence and selected audit institutionin terms of audit quality was observed. In the third and fifth hypothesizesrespectivelythere was a negative and significant relationshipbetween auditor select with high quality and the lack of managers influence with the variable ofrestated financial statements in the next year. And in the sixth hypothesis positiveand significant relationship was observed between auditor change in the restated yearand restatement of financial statements.

Downloads

Download data is not yet available.

Author Biographies

Rasool Yarifard, Wuhan University of Technology, Wuhan, China

Post- Doctoral Candidate, Department of Management, Wuhan University of Technology, Wuhan, China

Ye JianMu, Wuhan University of Technology, Wuhan, China

Faculty Member of Department of Management, Wuhan University of Technology, Wuhan, China

Alireza Saber

Ph.D. Candidate in Accounting

References

Blue, Qasim, KeyhanMaham and EsmaeilGoudarzi,(1389, independent auditor change and information transparency of listed companies inTehran Stock Exchange, Accounting Knowledge, the first issue, pp. 111- 135

Saghafi, Ali and Blue, Qasim, cost of equity and profit characteristics, Accounting Research, Issue 2, summer1388

HsasYeganehYahya, Raeesi, Zohre, Hosseini, Mojtaba (1388) the relationship between corporate governance and performance of listed companies inTehran Stock Exchange, Journal of Iran Management Sciences, Issue 13, pp. 75-100

Dadashi, Iman (1388) impact of corporate governance on the auditor's decisions about risk and master planning, AllameTabatabaiUniversity in Tehran.

ShariatPanahi, Seid Majid, and KazemiHossein. (1389), "the impact of the restatement of financial statements on information Content of profits", Journal of Accounting Studies, issue 26

Taherkhan, Masoume (1387) annul adjustments Iran Khodro, the world of economy, branch of Stock Exchange, 27Tir1388

Ghorbani, Saseq (1389) impact of auditor tenure contiunityon master audit quality, Martyr Chamran University.

Kordestani, GolamReza and others, (1389) empirically test or the importance of annual adjustments in the capital market, Accounting Research, issue 8, Winter 1389, PP62-73

Mehrani, Kaveh, Safarzadeh, Mohamad Hossein, (1389), explaination of the relationship between corporate governance and profit quality with local approach, Journal of Accounting Knowledge, issue 7, pp. 69-99

Nikbakht, Mohmad Reza, and Rafiee, Afsaneh, (1391) "Edition of affecting pattern on restatement of financial statements in Iran", Journal of Knowledge Accounting 3(9).

Agrawal, A. and S. Chadha 2005. Corporate governance and accounting scandals. Journal of Law and Economics 48: 371-406.

Aliza, Rotenstein, 2011. Corporate Governanace Changes Following Earning Restatements The Journal of Applied Business Research, 27:123-140

Altamuro, J., A. Beatty and J. Weber 2005. The effects of accelerated revenue recognition on earnings management and earnings informativeness: Evidence from SEC staff accounting bulletin No. 101. The Accounting Review 80 (2): 373-401.

Baber, W. and L. Liang 2009. Associations between internal and external corporate governance characteristics and the consequences of regulating governance practices. Working paper. The George Washington University.

Barth, M., W. Beaver, J. Hand and W. Landsman 2011. Accruals, cash flows, and equity values. Review of Accounting Studies 4 (3-4): 205-229.

Bebchuk, L. 2005. The case for increasing shareholder power. Harvard Law Review 118 (3): 835- 914.

Bebchuk, L., A. Cohen and A. Ferrell 2009. What matters in corporate governance? Review of Financial Studies 22 (2): 783-827.

Bebchuk. L.A. and J.M. Fried. 2005. Pay without performance: Overview of the issues. Journal of Applied Corporate Finance 17 (4): 8-23.

Brown, L., Caylor, M., 2006. Corporate governance and firm performance. Journal of Accounting and Public Policy 25, 409–434.

Burks, Jeffrey J. (2011). Are investors confused by restatements after Sarbanes-Oxley? The Accounting Review 86, 507-539.

Burns, N. and S. Kedia. 2006. The impact of performance-based compensation on misreporting. Journal of Financial Economics 79 (1): 35–67.

Bushee, B.J., M.E. Carter, and J. Gerakos. 2008. Institutional investor preferences for corporate governance mechanisms. Working Paper. The Wharton School, University of Pennsylvania.

Caylor, Marcus L. (2010). Strategic revenue recognition to achieve earnings benchmarks. Journal of Accounting Public Policy 29: 82-95.

Chen, X., Harford, J., and Li, K., 2007. Monitoring: Which institutions matter? Journal of Financial Economics 86 (2): 279–305.

Christine I. W, Kevin B. H. (2010), Firm Accrual Quality Surrounding Restatements, working paper, University of Waterloo

Cohen, Daniel A., A. Dey, and T. Z. Lys. (2008). Real and accrual-based earnings management in the pre- and post- Sarbanes-Oxley periods. The Accounting Review 83: 757-787.

Cohen, Daniel,2003, Quality of financial reporting choice: Determinants and Economics consequences, working paper, Northwestern University.

Cremers, M., and V. Nair, 2005. Governance mechanisms and equity prices. The Journal of Finance 60: 2859 - 2894.

Dechow, P., Ge, W., Schrand, C..2010. Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics 42: 132-150.

DeFond, M., R. Hann and X. Hu 2005. Does the market value financial expertise on audit committees of boards of directors? Journal of Accounting Research 43 (2): 153-193.

Doyle, J., W. Ge, and S. McVay. 2007. Determinants of weaknesses in internal control over financial reporting. Journal of Accounting and Economics 44: 193–223.

Efendi, J., A. Srivastava, and E. Swanson 2007. Why do corporate managers misstate financial statements? The role of option compensation and other factors. Journal of Financial Economics 85(3): 667– 708.

Erickson, M., M. Hanlon and E. Maydew2006. Is there a link between executive equity incentives and accounting fraud? Journal of Accounting Research 44 (1): 113-143.