Does Audit Committee Busyness Affect Financial Restatement? Evidence From Audit Committee Share Ownership

Uddin Bhuiyan, MB
Opare, S
Ahmed, Z
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We examine the association between audit committee (AC) busyness and financial restatement and determine whether AC share ownership moderates this relationship. Using logit regression analysis, we test our hypotheses on a sample of 6408 firm-year observations from 2004 to 2015 for companies listed on the Australian Securities Exchange. The study reveals that firms with busy ACs engage more in financial restatements. We also find that AC share ownership reduces financial restatements and attenuates the association between AC busyness and financial restatement. Our results are robust to endogeneity concerns emanating from firms’ deliberate decisions to grant shares to AC members. The findings of this research have several important policy implications. For instance, shareholders can benefit from AC members’ monitoring ability by allowing for share ownership. Further, our findings suggest that principles-based corporate governance guidelines have a beneficial effect on financial reporting quality. While prior studies offer mixed evidence, our research contributes to the auditing literature by providing evidence that AC share ownership moderates the association between AC busyness and financial restatement.

3501 Accounting, Auditing and Accountability , 3502 Banking, Finance and Investment , 35 Commerce, Management, Tourism and Services , 3507 Strategy, Management and Organisational Behaviour , 1499 Other Economics , 1501 Accounting, Auditing and Accountability , 3501 Accounting, auditing and accountability
Australian Accounting Review, ISSN: 1035-6908 (Print); 1835-2561 (Online), Wiley, 34(1), 29-54. doi: 10.1111/auar.12416
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© 2024 The Authors. Australian Accounting Review published by John Wiley & Sons Australia, Ltd on behalf of CPA Australia. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.