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Does the existence of voluntary audit committees really affect IFRS-required disclosure? The Kuwaiti evidence

Does the existence of voluntary audit committees really affect IFRS-required disclosure? The... The purpose of this article is to investigate the effect of the existence of a voluntary audit committee on the level of International Financial Reporting Standard (IFRS)-required disclosure practices in Kuwait. A multivariate regression model is estimated using Ordinary Least Squares analysis for a sample of 68 Kuwaiti companies listed on the Kuwait Stock Exchange (KSX) at the end of 2007 to test the association between the existence of a voluntary audit committee and the level of IFRS-required disclosure. The study's results indicate that the existence of the audit committee is significantly and positively associated with the level of IFRS-required disclosure. Other factors explaining this association are multiple family members on the board, industry type and leverage. In contrast, the other four independent variables (company size, profitability, company age and ownership diffusion) do not emerge as statistically significant explanations of the IFRS-required disclosures. The findings of the study will help policy makers and practitioners to anticipate that Kuwaiti companies with a higher level of compliance with the IFRS-required disclosures are expected to have an audit committee and a higher level of leverage. In addition, there are significant differences across industries in the level of compliance with the IFRS-required disclosures. It appears that Kuwaiti companies with lower levels of compliance with the IFRS-required disclosures are likely to be dominated by families. Furthermore, as KSX listed companies are not obliged to establish an audit committee, the results of this study show that such committees are important in significantly increasing the level of compliance with mandatory disclosure. Thus, an important implication of this study for the KSX is the need to advise all listed companies and policy makers to make the formation of an audit committee mandatory thereby increasing the level of mandatory disclosure. This study is the first to empirically investigate the effect of the existence of a voluntary audit committee on the IFRS-required disclosures provided by Kuwaiti companies. Furthermore, the findings reinforce the importance of an audit committee for enhancing the level of required disclosure. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Disclosure and Governance Springer Journals

Does the existence of voluntary audit committees really affect IFRS-required disclosure? The Kuwaiti evidence

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References (85)

Publisher
Springer Journals
Copyright
Copyright © 2011 by Palgrave Macmillan, a division of Macmillan Publishers Ltd
Subject
Business and Management; Business and Management, general; Accounting/Auditing; Corporate Finance; Corporate Governance
ISSN
1741-3591
eISSN
1746-6539
DOI
10.1057/jdg.2010.33
Publisher site
See Article on Publisher Site

Abstract

The purpose of this article is to investigate the effect of the existence of a voluntary audit committee on the level of International Financial Reporting Standard (IFRS)-required disclosure practices in Kuwait. A multivariate regression model is estimated using Ordinary Least Squares analysis for a sample of 68 Kuwaiti companies listed on the Kuwait Stock Exchange (KSX) at the end of 2007 to test the association between the existence of a voluntary audit committee and the level of IFRS-required disclosure. The study's results indicate that the existence of the audit committee is significantly and positively associated with the level of IFRS-required disclosure. Other factors explaining this association are multiple family members on the board, industry type and leverage. In contrast, the other four independent variables (company size, profitability, company age and ownership diffusion) do not emerge as statistically significant explanations of the IFRS-required disclosures. The findings of the study will help policy makers and practitioners to anticipate that Kuwaiti companies with a higher level of compliance with the IFRS-required disclosures are expected to have an audit committee and a higher level of leverage. In addition, there are significant differences across industries in the level of compliance with the IFRS-required disclosures. It appears that Kuwaiti companies with lower levels of compliance with the IFRS-required disclosures are likely to be dominated by families. Furthermore, as KSX listed companies are not obliged to establish an audit committee, the results of this study show that such committees are important in significantly increasing the level of compliance with mandatory disclosure. Thus, an important implication of this study for the KSX is the need to advise all listed companies and policy makers to make the formation of an audit committee mandatory thereby increasing the level of mandatory disclosure. This study is the first to empirically investigate the effect of the existence of a voluntary audit committee on the IFRS-required disclosures provided by Kuwaiti companies. Furthermore, the findings reinforce the importance of an audit committee for enhancing the level of required disclosure.

Journal

International Journal of Disclosure and Governance – Springer Journals

Published: Jan 20, 2011

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