NDLI: Auditor independence, corporate governance and aggressive financial reporting: an empirical analysis

Content Provider	Springer Nature Link
Author	Abdel Meguid, Ahmed M. Ahmed, Anwer S. Duellman, Scott
Copyright Year	2011
Abstract	This paper seeks to provide empirical evidence on the efficacy of three important governance mechanisms (auditors, directors, and institutional shareholders) in constraining aggressive financial reporting, proxied by abnormal accruals. It also examines the effects of the Sarbanes–Oxley Act (SOX) on their efficacy. Using a sample of US firms audited by the Big 5 (4) auditors between 2000 and 2004, we document a positive relation between abnormal accruals (our proxy for financial reporting aggressiveness) and auditors’ economic dependence on their clients. Furthermore, we find that this relation is driven by firms with weak non-auditor governance mechanisms before and after the enactment of SOX. The results suggest that aggressive financial reporting occurs only when multiple governance mechanisms ‘fail’. More specifically, such type of reporting requires that a highly dependent auditor operates in a ‘poor’ governance setting. Thus, the paper underscores the importance of strong governance in constraining aggressive financial reporting. Moreover, our results suggest that governance regulation (such as SOX) is not a substitute for strong governance mechanisms and thus caution against the over reliance on SOX-type legislation in other parts of the world.
Starting Page	283
Ending Page	307
Page Count	25
File Format	PDF
ISSN	13853457
Journal	Journal of Management and Governance
Volume Number	17
Issue Number	2
e-ISSN	1572963X
Language	English
Publisher	Springer US
Publisher Date	2011-04-13
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Corporate governance Auditor independence Outside directors Institutional shareholders Aggressive financial reporting The Sarbanes–Oxley Act (SOX) Management/Business for Professionals Accounting/Auditing Industrial Organization Sociology
Content Type	Text
Resource Type	Article
Subject	Business and International Management

Sl.	Authority	Responsibilities	Communication Details
1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
5	Website/Portal (Helpdesk)	Queries regarding NDLI and its services	support@ndl.gov.in
6	Contents and Copyright Issues	Queries related to content curation and copyright issues	content@ndl.gov.in
7	National Digital Library of India Club (NDLI Club)	Queries related to NDLI Club formation, support, user awareness program, seminar/symposium, collaboration, social media, promotion, and outreach	clubsupport@ndl.gov.in
8	Digital Preservation Centre (DPC)	Assistance with digitizing and archiving copyright-free printed books	dpc@ndl.gov.in
9	IDR Setup or Support	Queries related to establishment and support of Institutional Digital Repository (IDR) and IDR workshops	idr@ndl.gov.in

The effect of outside directors’ and auditors’ incentives on managers’ ability to manage cash bonuses

Corporate governance and the market reaction to stock repurchase announcement

Shareholders Should Welcome Knowledge Workers as Directors

Board Composition and Corporate Social Responsibility: An Empirical Investigation in the Post Sarbanes-Oxley Era

Countervailing institutional forces: corporate governance in Turkish family business groups

The effects of board and auditor independence on earnings quality: evidence from Italy

A Fig Leaf for The Naked Corporation

The adoption of deferred share unit plans for outside directors: economic and social determinants

Preventing the next wave of unreliable financial reporting: Why US Congress should amend Section 404 of the Sarbanes–Oxley Act

Auditor independence, corporate governance and aggressive financial reporting: an empirical analysis

Similar Documents

The effect of outside directors’ and auditors’ incentives on managers’ ability to manage cash bonuses

Corporate governance and the market reaction to stock repurchase announcement

Shareholders Should Welcome Knowledge Workers as Directors

Board Composition and Corporate Social Responsibility: An Empirical Investigation in the Post Sarbanes-Oxley Era

Countervailing institutional forces: corporate governance in Turkish family business groups

The effects of board and auditor independence on earnings quality: evidence from Italy

A Fig Leaf for The Naked Corporation

The adoption of deferred share unit plans for outside directors: economic and social determinants

Preventing the next wave of unreliable financial reporting: Why US Congress should amend Section 404 of the Sarbanes–Oxley Act

Auditor independence, corporate governance and aggressive financial reporting: an empirical analysis