Audit Committee Diversity toward Voluntary Disclosure Reporting with Existence of Regulatory Regime as Moderation Variable: a Critical Review

  • Abstract
  • Keywords
  • References
  • PDF
  • Abstract

    The audit committee is a fundamental and prerequisite tool for fulfilling board’s monitoring role of ensuring transparency, financial and managerial efficiency. Therefore, it has been applied to address perceived governance failure. This paper aims to critically review the previous literature on the relationship between audit committee diversity as a major corporate governance mechanism and corporate voluntary disclosure reporting (CVDR) with a change in the regulatory regime as moderation variable. This review specifically evaluates theoretical and empirical literature related to audit committee diversity such as independence, financial expertise, accounting expertise; and CVDR in order to highlight some important areas of gaps for future research in this field. It also, emphases the need for a more qualitative method for better understanding of the relationship. This paper proposes that examining the moderating influence of the change of the regulatory regime with regard to CVDR would provide more insight into the link between audit committee diversity and CVDR. The policy implication of the study is also discussed. Lastly, the paper stresses the importance of future studies linking audit committee diversity and CVDR, which are quite scanty the existing literature.


  • Keywords

    Corporate governance; Audit committee diversity; Voluntary disclosure; Regulatory regime.

  • References

      [1] Abbott, L. J., Parker, S., and Peters, G. F., & Peters, G. F. (2004). Audit committee characteristics and restatements. Auditing: A Journal Of Practice and Theory, 23(1), 69–87.

      [2] Abdullah, S.-N. (2006). Board composition, audit committee and timeliness of corporate financial reports in Malaysia. Corporate Ownership & Control, 4(2).

      [3] Abernathy, J. L., Beyer, B., Masli, A., & Stefaniak, C. (2014). The association between characteristics of audit committee accounting experts, audit committee chairs, and financial reporting timeliness. Advances in Accounting, 30(2), 283–297.

      [4] AbuRaya, R. K. (2012). The Relationship Between Corporate Governance and Environmental Disclosure: UK Evidence. Durham University.

      [5] Akhtaruddin, M., & Haron, H. (2010). Board ownership, audit committees’ effectiveness, and corporate voluntary disclosures. Asian Review of Accounting, 18(3), 245–259.

      [6] Al-Shaer, H., Salama, A., & Toms, S. (2017). Audit committees and financial reporting quality: evidence from UK environmental accounting disclosures. Journal of Applied Accounting Research, 18(1).

      [7] Alotaibi, B. M. N. A. (2014). Corporate Governance and Voluntary Disclosure in Kuwait. University of Bedfordshire.

      [8] Alshfire, F. M., Subekti, I., & Widya, Y. (2016). The effect of audit committee characteristics on timeliness of financial reporting by Using auditor quality and the moderating variable (An Empirical Study From Indonesian Manufacturing Companies). The International Journal of Accounting and Business Society, 24(1), 1–34.

      [9] Arcay, B. R. M., & Vazquez, M. F. M. (2005). Corporate characteristics, governance rules and the extent of voluntary disclosure in Spain. Advances in Accounting, 21(05), 299–331.

      [10] Barako, D. G., Hancock, P., & Izan, H. Y. (2006a). Factors influencing voluntary corporate disclosure by Kenyan companies. Corporate Governance, 14(2), 107–125.

      [11] Barako, D. G., Hancock, P., & Izan, H. Y. (2006b). Relationship between corporate governance attributes and volutanry disclosures in annual reports: The Kenyan experience. Journal of Financial Reporting, Regulation and Governance, 5(1), 1–25.

      [12] Bin-Ghanem, H., & Akmalia, A. M. (2016). The effect of board of directors and audit committee effectiveness on internet financial reporting: Evidence from gulf co-operation. Journal of Accounting in Emerging Economies, 6(4), 429–448.

      [13] Borgia, F. (2005). Corporate Governance and Transparency Role of Disclosure: How Prevent New Financial Scandals and Crimes ? School of International Service. Washington D.C.

      [14] Boyd, B. K., Haynes, K. T., & Zona, F. (2011). Dimensions of CEO– Board relations. Journal of Management Studies, 48, 1892–1923.

      [15] Boyd, C. (1996). Ethics and corporate governance: the issues raised by the Cadbury report in the United Kingdom. Journal of Business Ethics, 15(2), 167–182.

      [16] Brunk, K. . (2010). Exploring origins of ethical company/brand perceptions-a consumer perspective of corporate ethics. Journal of Business Research, 63(3), 255–262.

      [17] Cadbury-Report-Committee. (1992). The Financial Aspects of Corporate Governance. London: Gee and Co. Ltd.

      [18] Campbell, D., Shrives, P., & Saager, H. B. (2001). Voluntary disclosure of mission statements in corporate annual reports: signaling what and to whom? Business and Society Review, 106(1), 65–87.

      [19] Catalyst. (2005). Census of Women Board Directors of the Fortune 500.

      [20] Chau, G., & Gray, S. J. (2010). Family ownership, board independence and voluntary disclosure: Evidence from Hong Kong. Journal of International Accounting, Auditing and Taxation, 19(2), 93–109.

      [21] Chau, G. K., & Gray, S. J. (2002). Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore. The International Journal of Accounting, 37(2), 247–265.

      [22] Chen, J., & Roberts, R. (2010). Toward a more coherent understanding of the organization–society relationship: A theoretical consideration for social and environmental accounting research. Journal of Business Ethics, 97, 651–665.

      [23] Cheng, E. C. M., & Courtenay, S. M. (2006). Board composition , regulatory regime and voluntary disclosure. International Journal of Accoun Ting, 41(3), 262–289.

      [24] Chithambo, L. (2013). The Extent and Determinants of Greenhouse Gas Reporting in the United Kingdom. PhD Thesis. Bournemouth University.

      [25] Cohen, R. J., Hoitash, U., Krishnamoorthy, G., & Wright, M., A. (2014). The effect of audit committee industry expertise on monitoring the financial reporting process. Accounting Review, 89(1), 243–273.

      [26] Daily, C. M., Dalton, D. R., & Cannella, A. A. (2003). Corporate governance: Decades of dialogue and data. Academy of Management Review, 28, 371–382.

      [27] Daouk, H., Lee, C. M. C., & Ng, D. (2006). Capital market governance: How do security laws affect market performance? Journal of Corporate Finance, 12(3), 560–593.

      [28] DeFond, M., Hann, R., & Hu, X. (2005). Does the market value financial expertise on audit committees of boards of directors? Journal of Accounting Research, 43(2), 153–193.

      [29] Denis, D. K., & McConnell, J. J. (2002). International corporate governance. Journal of Finance and Quantitative Analysis, 38(1), 1–36.

      [30] Dewayanto, T. (2017). Audit committee toward internal control disclosure with the existence of foreign directors as moderation variable. Review of Integrative Business and Economics Research, 6(3), 324–332.

      [31] Durisin, B., & Puzone, F. (2009). Maturation of corporate governance research,1993–2007: An assessment. Corporate Governance: An International Review, 17, 266–291.

      [32] Ferrari, G., Ferraro, V., Profeta, P., & Pronzato, C. (2016). Gender quotas : Challenging the boards , performance , and the stock market. CESifo Working Paper Series No. 6084., (10239).

      [33] Fidanoski, F., Simeonovski, K., & Mateska, and V. (2014). The impact of board diversity on corporate performance: New evidence from Southeast Europe. Corporate Governance in the US and Global Settings, 26, 81–123.

      [34] Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston, MA: Pitman.

      [35] Freeman, R. E., Wicks, A. C., & Parmar, B. (2004). Stakeholder theory and the corporate objective revisited. Organization Science, 15(3), 364–369.

      [36] Garba, T., & Abubakar, B. A. (2014). Corporate board diversity and financial performance of insurance companies in Nigeria: an application of panel data approach. Asian Economic and Financial Review, 4(2), 257–277.

      [37] García-Sánchez, I. M., García-Meca, E., & Cuadrado-Ballesteros, B. (2017). Do financial experts on audit committees matter for bank insolvency risk-taking? The monitoring role of bank regulation and ethical policy. Journal of Business Research, 76, 52–66.

      [38] Gillan, S. L. (2006). Recent developments in corporate governance: An overview. Journal of Corporate Finance, 12(3), 381–402.

      [39] Gray, R., Owen, D., & Adams, C. (1996). Accounting and Accountability: Changes and Challenges in Corporate Social and Environmental Reporting. London: Prentice-Hall.

      [40] Gul, F.A. and Leung, S. (2004). Board leadership, outside directors’ expertise and voluntary corporate disclosures. Journal of Accounting and Public Policy, 23(5), 351–379.

      [41] Gulzar, M. A., & Zongjun, W. (2011). Corporate governance characteristics and earnings management: Empirical evidence from Chinese listed firms. International Journal of Accounting and Financial Reporting, 1(1), 133.

      [42] Harjoto, M., Laksmana, I., & Lee, R. (2015). Board diversity and corporate social responsibility. Journal of Business Ethics, 132(4), 641–660.

      [43] Harris, M. K. (2016). Professional Diversity of the Audit Committee and the Effect on the Financial Reporting Process. University of Nebraska,.

      [44] Hassan, O., & Marston, C. (2010). Disclosure measurement in the empirical accounting literature: A review article (Economics and Finance Working Paper Series No. No. 10–18).

      [45] Hassan, R., Marimuth, M., Tariq, E., & Aqeel, R. (2017). Ethnic and gender diversity in top level management and firm performance : Shareholder’s perspectives. Journal of International Women’s Studies, 18(4), 1–12.

      [46] Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1), 405–440.

      [47] Hili, W., & Affes, P. H. (2012). Corporate boards gender diversity and earnings Persistence: The case of French listed firms. Global Journal of Management and Business Resaerch, 12(22), 2249–4588.

      [48] Ho, S. S. M., & Wong, K. S. (2001). A study of the relationship between corporate governance structures and the extent of voluntary disclosure. Journal of International Accounting, Auditing and Taxation, 10(2), 139–156.

      [49] Hongxia, L., & Ainian, Q. (2008). Impact of corporate governance on voluntary disclosure in Chinese listed companies. Corporate Ownership and Control, 5(2).

      [50] Inchausti, B. na G. (1997). The influence of company characteristics and accounting regulation on information disclosed by Spanish firms. European Accounting Review, 6(1), 45–68.

      [51] Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.

      [52] Juhmani, O. I. (2013). ownership structure and corporate voluntary visclosure: Evidence from Bahrain. International Journal of Accounting and Financial Reporting, 3(2), 133.

      [53] Kamonjoh, E. (2014). Gender diversity on boards: A Review of Global Trends. ISS Governance.

      [54] Katmon, N., Mohamad, Z. Z., Norwani, N. M., & Al-Farooque, O. (2017). Comprehensive board diversity and quality of corporate social responsibility disclosure: Evidence from an emerging market. Journal of Business Ethics, 1–35.

      [55] Klein, A. (2002). Economic determinants of audit committee independence. The Accounting Review, 77(2), 435–452.

      [56] Lambert, R. A. (2001). Contracting theory and accounting. Journal of Accounting and Economics, 32(1), 3–87.

      [57] Leuz, C., Triantis, A., & Yue Wang, T. (2008). Why do firms go dark? Causes and economic consequences of voluntary SEC deregistrations. Journal of Accounting and Economics, 45(2–3), 181–208.

      [58] Li, J., Mangena, M., & Pike, R. (2012). The effect of audit committee characteristics on intellectual capital disclosure. The British Accounting Review, 44(2), 98–110.

      [59] Li, J., Mangena, M., & Pike, R. (2012). The effect of audit committee characteristics on intellectual capital disclosure. The British Accounting Review, 44(2), 98–110.

      [60] Liao, L., Luo, L., & Tang, Q. (2015). Gender diversity, board independence, environmental committee and greenhouse gas disclosure. British Accounting Review, 47(4), 409–424.

      [61] MacKinnon, D., Fairchild, A., & Fritz, M. (2007). Mediation analysis. Annual Review of Psychology, 58, 593–602.

      [62] Madi, H. K., Ishak, Z., & Manaf, N. A. A. (2014). The impact of audit committee characteristics on corporate voluntary disclosure. Procedia - Social and Behavioral Sciences, 164, 486–492.

      [63] Martinov-Bennie, N., Soh, D. S. B., & Tweedie, D. (2015). An investigation into the roles, characteristics, expectations and evaluation practices of audit committees. Managerial Auditing Journal, 30(8/9), 727–755.

      [64] McKinnon, J., & Dalimunthe, L. (2009). Voluntary disclosure of segment information by Australian diversified companies. Accounting and Finance Research, 33(1), 33–50).

      [65] McMullen, D. A. (1996). Audit committee performance: An investigation of the consequences associated with audit committees. Auditing: A Journal of Practice and Theory, 15(1), 87–103.

      [66] McNulty, T., Zattoni, A., & Douglas, T. (2013). Developing corporate governance research through qualitative methods: A Review of previous studies. Corporate Governance: An International Review, 21(2), 183–198.

      [67] Meek, G. K., Roberts, C. B., & Gray, S. J. (1995). Factors influencing voluntary report disclosures by U.S., U.K. and Continental European multinational corporations. Journal of International Business Studies, 26(3), 555–572.

      [68] Mohd-Nasir, N., & Abdulah, S. N. (2004). Voluntary disclosure and corporate governance among financially distressed listed firms in Malaysia. Financial Reporting, Regulation and Governance, 1(1), 95–139.

      [69] Morris, R. (1987). Signalling, agency theory and accounting policy choice. Accounting and Business Research, 18(69), 47–56.

      [70] Othman, R., Farhana, I., Maznah, S., Arif, M., & Abdul, N. (2014). Influence of audit committee characteristics on voluntary ethics disclosure. Procedia - Social and Behavioral Sciences, 145, 330–342.

      [71] Pige, B. (2002). Stakeholder theory and corporate governance: The nature of the board information. Management Journal of Contemporary Issue, 7(1), 1–17.

      [72] Rao, K., & Tilt, C. (2016). Board composition and corporate social responsibility: The role of diversity, gender, strategy and decision making. Journal of Business Ethics, 138(2), 327–347.

      [73] Razek, M. A. (2015). The association between corporate social responsibility disclosure and corporate governance ... Research Journal of Finance and Accounting, 5(1), 2222–2847.

      [74] Rouf, M. A. (2016). Board diversity and corporate voluntary disclosure in the annual reports of Bangladesh. Risk Governance and Control: Financial Markets and Institutions, 6(4), 48–55.

      [75] Samaha, K., Khlif, H., & Hussainey, K. (2015). The impact of board and audit committee characteristics on voluntary disclosure: A meta-analysis. Journal of International Accounting, Auditing and Taxation, 24, 13–28.

      [76] Shehata, N. F. (2014). Theories and Determinants of Voluntary Disclosure. Accounting and Finance Research, 3(1), 18–26.

      [77] Solomon, J. (2010). Corporate Governance and Accountability (Third ed.). United Kingdom: John Wiley & Sons, Inc.

      [78] Song, J., & Windram, B. (2004). Benchmarking audit committee effectiveness in financial reporting. International Journal of Auditing, 8(3), 195–205.

      [79] Sukthomya, D. (2011). The empirical evidence of voluntary disclosure in the annual reports of of listed companies: The case of Thailand. University of Nottingham.

      [80] Uzun, H., Szewczyk, S. H., & Varma, R. (2004). Board composition and corporate and corporate fraud. Financial Analysts Journal, 33–43.

      [81] Wagana, D. M., & Nzulwa, J. D. (2016). Corporate governance, board gender diversity and corporate performance: A critical review cf literature. European Scientific Journal, 12(7), 221–234.

      [82] Walker, R. G. (2004). Gaps in guidelines on audit committees. Abacus, 40(2), 157–192.

      [83] Wang, M., & Hussainey, K. (2013). Voluntary forward-looking statements driven by corporate governance and their value relevance. Journal of Accounting and Public Policy, 32(3), 26–49.

      [84] Wu, H., Patel, C., & Perera, H. (2015). Implementation of audit committee and independent director for financial reporting in China. Advances in Accounting, 31(2), 247–262.

      [85] 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.

      [86] Yasin, F., Muhamad, R., & Sulaiman, N. (2014). Corporate Governance Research: A Review of Qualitative Literature. International Conference on Technology and Business Management, 14–25.




Article ID: 18330
DOI: 10.14419/ijet.v7i3.30.18330

Copyright © 2012-2015 Science Publishing Corporation Inc. All rights reserved.