Governance and Accountability: The Role of Audit Committee
Abstract
This paper aimed at investigating good governance in and its role in improving the administrative and financial performance, in order to shed light on its financial and administrative transparency practices, accountability indicators, process of information disclosure and accessibility, and the procedures and mechanisms used to control financial and administrative corruption. One can barely come across any term more stimulating than accountability revealing both the idealistic expectations and technical requirements of governance. This paper provided deep insights into the advancements in corporate governance and accountability, and in particular the influence of internal and external factors. In this regard, the paper intended to add onto the available literature on the convergence of national corporate governance systems and the associated implications. The paper further presents important implications for key players in corporate governance development and accountability, audit committee. This paper evaluated and criticized the fragmented contents of the term governance and elaborate the relationships between governance, accountability and audit committee as well. Although accountability is fully considered as a critical element of public administration, it is a crucial question to ask whether there exists an inevitable relation between accountability and governance. The ideal praxis of accountability is best achieved through a centralized concentration of control or through dispersed power and delegated responsibilities. Despite numerous studies done on audit committee and corporate governance, very little empirical research has analyzed the direct and indirect relationships between audit committee and corporate governance and accountability. This paper sought to bridge this research gap by carrying out an in-depth literature review on the audit committee influence on the relationship between audit committee and governance. The paper looks into the role of audit committee on the direct relationship between accountability and governance.
Keywords: Governance, Accountability, Audit Committee, Transparency
References
Agrawal, A. & Chadha, S. 2005. Corporate governance and accounting scandals. Journal of Law and Economics, 48(2):371–406.
Akbar, A. (2014). Corporate governance and firm performance: Evidence from textile sector of Pakistan. Journal of Asian business strategy, 4(12), 200-207.
Akinsulire, O. (2010). Financial Management (6th edition), Lagos: Ceemol Nigeria Ltd. Al-Baidhani, A. M. (2014). The role of audit committee in corporate governance: descriptive study. SSRN Electronic Journal.
André, R. (2010). Assessing the accountability of government-sponsored enterprises and quangos. Journal of Business Ethics, 97(2), 271-289.
Argento, D., Grossi, G., & Thomasson, A. (2011). Governance and Control of Externalized Water Service Management: Comparing solutions adopted in Italy and Sweden. Corporate Ownership & Control, 188.
Armstrong, A, Jia, X & Totikidis, V. (2005). Parallels in Private and Public Sector Governance, GovNet Annual Conference, Contemporary Issues in Governance. Paper presented to GovNet Annual Conference, Melbourne, 28-30 November
Barberis, P. (1998). The new public management and a new accountability. Public administration, 76(3), 451-470.
Basuony, M. A., Mohamed, E. K., Hussain, M. M., & Marie, O. K. (2016). Board characteristics, ownership structure and audit report lag in the Middle East. International Journal of Corporate Governance, 7(2), 180-205.
Baxter, P., & Cotter, J. (2009). Audit committees and earnings quality. Accounting & finance, 49(2), 267-290.
Bevir, M. (2009). Key concepts in governance. Los Angeles, Calif: SAGE
Beyanga, T. A. K. (2011). Internal Audit Function, Employee Attitudes and Financial Performance of Public Universities: A Case Study of Kyambogo and Makerere Universities. Makerere University Business School.
Bhagat, S., & Black, B. (1998). Board independence and long-term performance. University of Colorado and Stanford University Working Paper.
Bhagat, S., & Jefferis, R. H. (2005). The econometrics of corporate governance studies. Mit Press. Bhattacharya, S. (2012). The effectiveness of the ISM Code: A qualitative enquiry. Marine Policy, 36(2), 528-535.
Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees. (1999). Report and recommendations of the Blue-Ribbon Committee on improving the effectiveness of corporate audit committees. The Business Lawyer, 1067-1095.
Bond, J. & Dent, U. (2008). Auditing: A Nigeria Perspective. Owerri: Mantle Publisher. Bouckaert, G. (2017). Taking stock of “governance”: A predominantly European perspective. Governance, 30(1), 45-52.
Bovens, M. (2005). Public Accountability. In the Oxford Handbook of Public Management; Ferlie E., Lynne L., Pollitt C., Eds.; Oxford University Press: Oxford.
Bovens, M. (2010). Two Concepts of Accountability: Accountability as a Virtue and as a Mechanism. West European Politics, 33(5), 946-967.
BraadBaart, O. (2007). Privatizing water: The Jakarta concession and the limits of contract. In a World of Water (pp. 297-320). Brill.
Broadbent, J., Dietrich, M., & Laughlin, R. (2002). The Development of Principal-Agent, Contracting and Accountability Relationships in the Public Sector. Public Management: Critical Perspectives, 2, 107.
Bushman, R. M., & Smith, A. J. (2001). Financial accounting information and corporate governance. Journal of accounting and Economics, 32(1-3), 237-333.
Bushman, R. M., & Smith, A. J. (2003). Transparency, financial accounting information, and corporate governance. Financial accounting information, and corporate governance. Economic Policy Review, 9(1).
Chan, K. C., & Li, J. (2008). Audit committee and firm value: Evidence of outside top executive as director corporate governance: An International Review, 16(1), 16–31.
Clarke, T. (2004). Theories of corporate governance. The Philosophical Foundations of Corporate Governance, Oxon.
Colley, J. L., Doyle, J., Logan, L. W. & Stettinius (2005). What is Corporate Governance? New York: McGrew- Hill
Collier, P. (1992). Audit committees in large UK companies. Research Board of the Institute of Chartered Accountants in England and Wales.
Collier, P. (1996). The rise of the audit committee in UK quoted companies: a curious phenomenon?. Accounting, Business & Financial History, 6(2), 121-140.
Collier, P., & Gregory, A. (1999). Audit committee activity and agency costs. Journal of Accounting and Public Policy, 18(4-5), 311-332.
Collier, P., & Zaman, M. (2005). Convergence in European corporate governance: The audit committee concept. Corporate Governance: An International Review, 13(6), 753-768.
Dahya, J., Dimitrov, O., & McConnell, J. J. (2008). Dominant shareholders, corporate boards, and corporate value: A cross-country analysis. Journal of Financial Economics, 87(1), 73-100.
Davidson, R., Goodwin‐Stewart, J., & Kent, P. (2005). Internal governance structures and earnings management. Accounting & Finance, 45(2), 241-267.
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1996). Causes and consequences of earning manipulation: An analysis of firms subject to enforcement actions by the SEC. Contemporary Accounting Research, 13(2), 1-36.
DeFond, M. L., & Jiambalvo, J. (1991). Incidence and Circumstances of Accounting Errors. The Accounting Review, 66(3), 643.
DeFond, M. L., Hann, R. N., & Hu, X. (2005). Does the market value financial expertise on audit committees of boards of directors?. Journal of accounting research, 43(2), 153-193.
Deleon, L. (1998). Accountability in a ‘reinvented’ government. Public Administration, 76(3), 539-558.
DeZoort, F. T., & Salterio, S. E. (2001). The effects of corporate governance experience and financial‐reporting and audit knowledge on audit committee members' judgments. Auditing: A Journal of Practice & Theory, 20(2), 31-47.
Dubnick, M. (2005). Accountability and the promise of performance: In search of the mechanisms. Public Performance & Management Review, 28(3), 376-417.
Dwivedi, O.P. & Jabbra, J. (1988). Introduction: Public Service Responsibility and Accountability. In Public Service Accountability. A Comparative Perspective, Jabbra J.; Dwivedi O.P., Eds.; Kumarian Press: Hartford.
Fadzil, F. H., Haron, H., & Jantan, M. (2005). Internal auditing practices and internal control system. Managerial Auditing Journal.
Gendron, Y., & Bédard, J. (2006). On the constitution of audit committee effectiveness. Accounting, Organizations and Society, 31(3), 211-239.
Gendron, Y., Be ́ dard, J., & Gosselin, M. (2004). Getting inside the black box: A field study of practices in “effective” audit committees. Auditing: A Journal of Practice & Theory, 23(1), 153-171.
Gilardi, F. (2001). Principal-agent models go to Europe: Independent regulatory agencies as ultimate step of delegation. In ECPR General Conference, Canterbury (UK) (pp. 6-8).
Gilkison, B. (1999). Accounting for a clean green environment: Obligations and opportunities for New Zealand businesses and their accountants.
Goddard, A. (2005). Accounting and NPM in UK local government–contributions towards governance and accountability. Financial Accountability & Management, 21(2), 191-218.
Goodwin‐Stewart, J., & Kent, P. (2006). The use of internal audit by Australian companies. Managerial Auditing Journal.
Gramling, A. A., Maletta, M. J., Schneider, A., & Church, B. K. (2004). The role of the internal audit function in corporate governance: A synthesis of the extant internal auditing literature and directions for future research. Journal of Accounting literature, 23, 194.
Gray, A., & Jenkins, B. (1993). Codes of accountability in the new public sector. Accounting, Auditing & Accountability Journal.
Greiling, D., & Spraul, K. (2010). Accountability and the challenges of information disclosure. Public Administration Quarterly, 338-377.
Heath, J., & Norman, W. (2004). Stakeholder theory, corporate governance and public management: what can the history of state-run enterprises teach us in the post-Enron era?. Journal of business ethics, 53(3), 247-265.
Higgs, D. (2002). Review of the role and effectiveness of non-executive directors: Consultation Paper. London: Department of Trade and Industry.
Holm, C., & Schøler, F. (2010). Reduction of asymmetric information through corporate governance mechanisms–the importance of ownership dispersion and exposure toward the international capital market. Corporate Governance: An International Review, 18(1), 32- 47.
Iskander, M., & Chamlou, N. (2000). Corporate governance: A framework for implementation. The World Bank.
Kahan, M., & Rock, E. B. (2003). Corporate constitutionalism: antitakeover charter provisions as precommitment. University of Pennsylvania Law Review, 152(2), 473-522.
Kalbers, L. P., & Fogarty, T. J. (1993). Audit committee effectiveness: An empirical investigation of the contribution of power. Auditing, 12(1), 24.
Kalbers, L. P., & Fogarty, T. J. (1998). Organizational and economic explanations of audit committee oversight. Journal of Managerial Issues, 129-150.
Kevin, L. (2009). Liability Exposures of Audit Committee Chairs. Retrieved 21/10/2012 from http://www. dandodiary. com/2014/04/articles/director-and-officer-liability/liability- exposures-of-audit-committee-chairs.
Klein, A. (2002). Economic determinants of audit committee independence. The Accounting Review, 77(2), 435-452.
Kooiman, J. (2003). Governing as governance. Sage.
Mbaabu, L. M. (2010). The relationship between corporate governance, ownership structure and financial performance of insurance companies in Kenya (dissertation, University of Nairobi, Kenya).
McNulty, T., Roberts, J., & Stiles, P. (2005). Undertaking governance reform and research: Further reflections on the Higgs review. British Journal of Management, 16, S99-S107.
Medori, D., & Steeple, D. (2000). A framework for auditing and enhancing performance measurement systems. International journal of operations & production management.
Menon, K., & Williams, J. D. (1994). The use of audit committees for monitoring. Journal of accounting and public policy, 13(2), 121-139.
Millstein, I. M., & MacAvoy, P. W. (1998). The active board of directors and performance of the large publicly traded corporation. Colum. L. Rev., 98, 1283.
Min, B. S., & Smyth, R. (2012). Globalisation, Corporate Governance and Firm Productivity. Monash Univ., Department of Economics.
Monks, Robert A. G., & Minow N., (2004). Corporate governance. Malden, MA: Blackwell. Morin, R. A., & Jarrell, S. L. (2000). Driving shareholder value: value-building techniques for creating shareholder wealth. McGraw Hill Professional.
Mulgan, R. (2000). ‘Accountability’: An ever‐expanding concept? Public administration, 78(3), 555-573.
Mulgan, R. (2003). One cheer for hierarchy-Accountability in disjointed governance. Political science, 55(2), 6-18.
Okaro, S. C., & Okafor, G. O. (2013). Drivers of Audit Failure in Nigeria- Evidence from Cadbury. Research Journal of Finance and Accounting, 4(6), 14–17.
Okoye, E., & Cletus, A. (2010). Enhancing the effectiveness of audit committee in Nigerian manufacturing companies. Journal of Policy and Development Studies, 4(2), 117-127.
O'Meara, B., & Petzall, S. (2007). How important is the role of the chancellor in the appointment of Australian vice‐chancellors and university governance?. International Journal of Educational Management.
Osborne, S. P. (2006). The New Public Governance? Public Management Review, 8(3), 377–387
Owolabi, A., & Ogbechia, C. (2010). Audit committee reports and corporate governance in Nigeria. International Journal Critical Accounting, 2(1), 64-78.
Owolabi, S. A., & Dada, S. O. (2011). Audit committee: An instrument of effective corporate governance. European Journal of Economics, Finance and Administrative Sciences, 35(35), 174-183.
Polidano, C. (1998). Why bureaucrats can't always do what Ministers want: multiple accountabilities in Westminster democracies. Public Policy and Administration, 13(1), 35- 50.
Price, R., Román, F. J., & Rountree, B. (2011). The impact of governance reform on performance and transparency. Journal of Financial Economics, 99(1), 76-96.
Raghunandan, K., Rama, D. V., & Read, W. J. (2001). Audit committee composition,“gray directors,” and interaction with internal auditing. Accounting Horizons, 15(2), 105-118.
Rashid, K., & Islam, S. M. (2008). Corporate Governance and Firm Value: Econometric Modellling and Analysis of Emerging and Developed Financial Markets. Emerald Group Publishing.
Rezaee, Z. (2009). Corporate governance and ethics. John Wiley & Sons. Inc, USA.
Roberts, J., & Scapens, R. (1985). Accounting systems and systems of accountability— understanding accounting practices in their organisational contexts. Accounting, organizations and society, 10(4), 443-456.
Robinson, D. R., & Owens-Jackson, L. A. (2009). Audit committee characteristics and auditor changes. Academy of Accounting and Financial Studies Journal, 13, 117.
Romzek, B. S., & Dubnick, M. J. (1987). Accountability in the public sector: Lessons from the Challenger tragedy. Public administration review, 227-238.
Rose‐Ackerman, S. (2017). What does “governance” mean?. Governance, 30(1), 23-27.
Saidin, S. F. B. (2007). Audit committee characteristics and quality of unaudited financial accounts (Doctoral dissertation, Dissertation retrieved 8/3/2012 from http://eprints. usm. my/7837/1/audit_committee_characteristics_and_quality_of_unaudited_financial_accounts. pdf).
Sale, H. A. (2003). Delaware's Good Faith. Cornell L. Rev., 89, 456.
Salehi, M., Zanjirdar, M., & Zarei, F. (2012). Factors affecting the quality of audit committee A study. Journal of Accounting Research and Audit Practices, Xi (4), 34–48.
Sandu, C., & Haines, R. (2014). Theory of governance and social enterprise. The USV Annals of Economics and Public Administration, 14(2 (20)), 204-222.
Securities and Exchange Commission (SEC)(2011): Code of corporate governance in Nigeria. Retrieved from http://www.sec.gov.ng.com/ governance.htm
Shaoul, J., Stafford, A., & Stapleton, P. (2012). Accountability and corporate governance of public private partnerships. Critical Perspectives on Accounting, 23(3), 213-229.
Shore, C., & Wright, S. (2004). Whose accountability? Governmentality and the auditing of universities. parallax, 10(2), 100-116.
Sinclair, A. (1995). The chameleon of accountability: Forms and discourses. Accounting, organizations and Society, 20(2-3), 219-237.
Thomsen, S. (2008). An introduction to corporate governance. Copenhagen: DJOF Publishers. Torfing, J., Peters, B. G., Pierre, J., & Sørensen, E. (2012). Interactive governance: Advancing the paradigm. oxford university Press on demand.
Turley, S., & Zaman, M. (2007). Audit committee effectiveness: informal processes and behavioural effects. Accounting, Auditing & Accountability Journal.
Williamson, O. E. (2005). Transaction cost economics and business administration. Scandinavian journal of Management, 21(1), 19-40.