An Investigation of the Audit Committee Characteristics Effects on Corporate Social Responsibility Disclosure

Document Type : Research Paper

Authors

1 Assistant Prof., Department of Accounting, University of Mazandaran, Babolsar, Iran

2 Ph.D. Candidate, Department of Accounting, University of Mazandaran, Babolsar, Iran

3 MSc., Department of Accounting. Islamic Azad University, Damghan, Ira

Abstract

Objective: Thewaveofscandalsandcollapsesoflargefinancialinstitutions and firms in the world leads to create new corporate governance rules, and one of the most important ones is the necessity of an audit committee in the corporate governance structure. On the other hand, the impact of companies on society has also become a global concern and companies face increased pressure from stakeholders to have a broader view of their goals and activities in terms of social and environmental dimensions. In the same vein, this issue has been considered as corporate social responsibility in most studies in Iran and other countries. However, there are concerns about the quantity and quality of disclosure of corporate social responsibility. Accordingly, it is necessary that committees such as the audit committee be effective in reducing these concerns as a monitoring mechanism of corporate governance mechanisms, and can serve as a tool of monitoring and improving disclosure of corporate social responsibility. Accordingly, the main purpose of this study is to investigate the effectsoftheAudit Committee Characteristics on disclosure of corporate social responsibility.
Methods: For this purpose, 133 listed companies at the Tehran Stock Exchange during 2013 to 2017 were selected as the sample and multiple regression equations of integrated data method. In addition, a checklist of 17 components and 60 criteria, including three social, economic, and environmental dimensions of social responsibility has been used to measure the disclosure level of social responsibility.
Results: Findings of the research show that the characteristics of the audit committee including independence, size, financial expertise, and gender diversity of the members of the audit committee have a positive and significant impact on the disclosure of corporate social responsibility.
Conclusion: Effective audit committee, according to the obtained results, as an effective mechanism, causes improving the credibility of financial and non-financial reporting such as social responsibility disclosure. That is, effective audit committee can improve the level of voluntary disclosure of information like social responsibility disclosure through monitoring the reporting process.

Keywords

References

References
Abbott, W., Monsen, R. (1979). On the measurement of corporate social responsibility: Self-reported disclosure as a measure of corporate social involvement. Academic Management Journal, 22(3), 501-515.
Aboody, D., Lev, B. (2000). Information Asymmetry, R and D, and Insider Gains. The Journal of Finance, 55 (6), 2747–2766.
Appuhami, R., & Tashakor, S. (2017). The impact of audit committee characteristics on CSR disclosure: An analysis of Australian firms. Australian Accounting Review, 27(4), 400-420.
Bahar Moghadam, M., Sadeghi, Z., Safarzadeh, S. (2013). Investigating the Relationship of Corporate Governance Mechanisms on Disclosure of Corporate Social Responsibility. Journal of Financial Accounting, 5(20), 90-107. (in Persian)
Ball, A., Owen, D.L. Gray, R. (2000). External Transparency or Internal Capture? The Role of Third Party Statements in Adding Value to Corporate Environmental Reports. Business Strategy and the Environment, 9 (1), 1–23.
Barzegar, G. (2014). A model for corporate social responsibility disclosure and sustainability and the situation in firms listed in the Tehran Stock Exchange. Ph.D Dissertation. Tehran, Allameh Tabatabai University. (in Persian)
Barzegar, G., Ghavvasi Kenari, M. (2016). Disclosure Level of Social Responsibility and Dividend Policy in Companies Listed in Tehran Stock Exchange. Journal of Accounting knowledge, 7(24), 155-180. (in Persian)
Barzegar, G., Hassas Yegane, Y. (2013). Delivery of the components and indicators of social responsibility for companies and the current situation in Iran. Journal of Cultural Studies, Social Development, 2(1), 210-232.(in Persian)
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, 13-35.
Bedard, J., Coulombe, D. Courteau, L. (2008). Audit Com- ´ mittee, Underpricing of IPOs, and Accuracy of Management Earnings Forecasts, Corporate Governance: An International Review, 16 (6), 519–535.
Bilimoria, D. & Wheeler, J.V. (2000).Women Corporate Directors: Current Research and Future Directions. Women in Management: Current Research Issues, 2, 138–63.
Carcello, J.V. & Neal, T.L. (2003). Audit Committee Independence and Disclosure: Choice for Financially Distressed Firms. Corporate Governance: An International Review, 11 (4), 289–299.
Choi, B.B., Lee, D., & Psaros, J. (2013). An Analysis of Australian Company Carbon Emission Disclosures. Pacific Accounting Review, 25 (1), 58–79.
Cornett, M.M., McNutt, J.J. & Tehranian, H. (2009). Corporate Governance and Earnings Management at Large U.S. Bank Holding Companies. Journal of Corporate Finance, 15 (4), 412– 430.
De Vlaminck, N., Sarens, G. (2015). The relationship between audit committee characteristic and financial statement quality evidence from Belgium. Journal of Management & Governance, 19(1), 145-166.
Ernst & Ernst (1978). Social Responsibility Disclosure: 1978 Survey, Cleveland.
Fakhari, H., Mohamadi, J., Hasan Nataj Kordi, M. (2015). Effect of the Audit Committee on the Effectiveness of Profit Management through Actual Items. Empirical Financial Accounting Studies, 12(46), 123- 146. (in Persian)
Field, A. (2009). Discovering statistics using SPSS. Sage publications.
Gul, F.A., Srinidhi, B. & Ng, A.C. (2011). Does Board Gender Diversity Improve the Informativeness of Stock Prices? Journal of Accounting and Economics, 51 (3), 314–338.
Hassas Yegane, Y., Barzegar, G. (2015).A model for social responsibility disclosure and lasting of companies and its current situation on those listed in Tehran Stock Exchange. Journal of Securities Exchange, 8(29), 91-110. (in Persian)
Iatridis, G.E. (2013). Environmental disclosure quality: Evidence on environmental performance, Corporate governance and value relevance. Emerging Markets Review, 14, 55–75.
Jamali, D., Safieddine, A.M. & Rabbath, M. (2008). Corporate Governance and Corporate Social Responsibility Synergies and Interrelationships. Corporate Governance: An International Review, 16 (5), 443–459.
Jensen, M.C. (1993). The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems. Journal of Finance, 48 (3), 831–880.
Kamyabi, Y., Borzhmehrani, A. (2014).Investigating the Effects of the Audit Committee on the Optional Disclosure of Companies Listed in Tehran Stock Exchange. Audit Knowledge, 17(67), 147-161. (in Persian)
Kamyabi, Y., Saberi, F. (2017). The effect on the relationship between social responsibility disclosure of research and development expenses and stock returns. Financial Accounting Quarterly,9(33), 51-77. (in Persian)
Karamanou, I. & Vafeas, N. (2005). The Association between Corporate Boards, Audit Committees, and Management Earnings Forecasts: An Empirical Analysis. Journal of Accounting Research, 43 (3), 453–486.
Kelton, A.S. & Yang, Y.W. (2008).The Impact of Corporate Governance on Internet Financial Reporting. Journal of Accounting and Public Policy, 27 (1), 62–87.
Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate Governance and Corporate Social Responsibility Disclosures: Evidence from an Emerging Economy. Journal of Business Ethics. Available at SSRN: https://ssrn.com/abstract=2051064.
Kolk, A. & Pinkse, J. (2010). The Integration of Corporate Governance in Corporate Social Responsibility Disclosures. Corporate Social Responsibility and Environmental Management, 17 (1), 15–26.
Lari Dasht Byaz, M., Oradi, J. (2016).Features of the audit committee and remuneration of the auditor evidence of Tehran Stock Exchange. Empirical Research in Accounting, 6(22), 69-94.(in Persian)
Li, J., Mangena, M. & Pike, R. (2012). The Effect of Audit Committee Characteristics on Intellectual Capital Disclosure. British Accounting Review, 44 (2), 98–110.
Mangena, M. & Pike, R. (2005). The Effect of Audit Committee Shareholding, Financial Expertise and Size on InterimFinancial Disclosures. Accounting and Business Research, 35 (4), 327–349.
Mangena, M. & Tauringana, V. (2007). Corporate Compliance with Non-mandatory Statements of Best Practice: The Case of the ASB Statement on Interim Reports. European Accounting Review, 16 (2), 399–427.
Maran Jori, M., Alikhani, R. (2014). Disclosure of social responsibility and corporate governance. Accounting and auditing review, 21(3), 329-348.(in Persian)
McMullen, D.A. & Raghunandan, K. (1996). Enhancing Audit Committee Effectiveness. Journal of Accountancy, 182, 79–81.
Neill, J.D., Stovall, O., Jinkerson, S., Darryl, L. (2011). A critical analysis of the accounting industry’s voluntary code of conduct. Journal of Business Ethics, 59(1-2), 101-108.
Oh, W. Y., Chang, Y. K., & Martynov, A. (2011).The Effect of Ownership Structure on Corporate Social Responsibility: Empirical Evidence from Korea. Journal of Business Ethics, 104 (2), 283-297.
Othman, R., Ishak, I. F., Mohd Arif, S.M., Abdul Aris, N. (2014).Influence of audit committee characteristics on voluntary ethics disclosure. Social and Behavioral Sciences, 145, 330 – 342.
Pricewater House Coopers (2000). Audit Committee Effectiveness: What Works Best. 2nd edition. Altamonte Springs, FL: The Institute of Internal Auditors Research Foundation.
Pucheta-Mart´ınez, M.C. & De Fuentes, C. (2007). The Impact of Audit Committee Characteristics on the Enhancement of the Quality of Financial Reporting: An Empirical Study in the Spanish Context. Corporate Governance: An International Review, 15 (6), 1394–1412.
Razek, M. A. (2014). The association between corporate social responsibility disclosure and corporate governance – a survey of Egypt. Research Journal of Finance and Accounting, 5 (1), 93-98.
Royaii, R., Ebrahimi, M. (2015). Investigating the Effect of Audit Committee Characteristics on the Level of Voluntary Disclosure of Ethics. Mobarakeh Fiscal Accounting Scientific Papers, 7(25), 71-88. (in Persian)
Solimani Amiri, G., Fasihi, S. (2015). Investigating the Relationship between Audit Committee Characteristics and Accrual Management of Acquired Companies in Tehran Stock Exchange. Accounting Verifications,2(8), 15- 34. (in Persian)
Walt, N. & Ingley, C. (2003). Board Dynamics and the Influence of Professional Background, Gender and Ethnic Diversity of Directors. Corporate Governance: An International Review, 11 (3), 218–234.
Williams, S. M. (1999). Voluntary Environmental and Social Accounting Disclosure Practices in the Asia-Pacific Region: An International Empirical Test of Political Economy Theory. The International Journal of Accounting, 34 (2), 209-238.
Yang, J.S. & Krishnan, J. (2005). Audit Committee and Quarterly Earnings Management, International Journal of Auditing, 9 (3), 201–219.
Zarei, A. Ghasemi, M. (2016).Effect of Audit Committee Characteristics on Financial Reporting Quality. Journal of Accounting Reviews, 3(12), 43- 64. (in Persian)
 
Accounting and Auditing Review
Volume 26, Issue 1
2019
Pages 19-38

Files

Share

How to cite

Statistics