We focused on the discussion of the timeline of the financial report as one of the expressions of the quality of the financial report. The timeliness of submission of financial statements depends on the period of completion of the audit procedure. Previous studies by Bedard et al. 2010) and Spira (2003) show that AC performance is affected by board characteristics.
Some characteristics of ACs that have been studied in previous studies include size, member independence, gender ratio, and meeting frequency (Mohamad Nor, Shafie, & wan hussin, 2010; Sun, Liu, & Lan, 2011). Our findings show that the effectiveness of the AC role does not depend only on the number of experts. It is important because each committee member may need some discussion with the others.
AC with more meetings will take additional time to effectively supervise the process of the financial reporting of the business. This study's population consists of all the manufacturing companies listed on the Indonesian Stock Exchange (IDX) from 2014 to 2018. Audit firm size The size of the accounting firm in terms of assets, the number of employees and the number of clients.
Following previous literature by Al-Rassas and Kamardin (2015) and Sun et al. 2014) AC financial expert (ACFE) is defined as the ratio between AC financial and accounting knowledge and the total number of AC members.
Empirical Results and Discussion
The descriptive statistics in Table 3 showed that the audit firm's time to complete the audit report from the financial statement closing date averaged 98.67 days with a standard deviation of 11.49. The value reduction of 4.519 with the significance at the 0.05 level indicated that the hypothesized model fit the data. This means that the number of AC does not play a significant role for timeliness in financial reports.
The results indicate that the company having a lot of financial expertise committee does not affect timeliness performance. The last hypothesis suggests that the meeting frequency of the member will affect the timelines. This means that the number of the meeting will affect the likelihood of the report being on time.
De Fuentes (2007) believes that the size of the accounting board is important, but the number of independent board members is more important. The AC has the responsibility to ensure that the financial report does not mislead the user (principal).
Summary Conclusion
The relationship between characteristics of audit committee accounting experts, audit committee chairs, and financial reporting timing. Internal and external audit attributes, audit committee characteristics, ownership concentration and earnings quality: Evidence from Malaysia. An empirical analysis of the relationship between board composition and financial statement fraud.
The impact of audit committee characteristics on improving the quality of financial reporting: an empirical study in the Spanish context. The Effect of Board of Directors Size and Audit Committee Size on Earnings Management in Nigerian Consumer Industry Companies. Bringing Darkness to Light: The Influence of Auditor Quality and Audit Committee Expertise on the Timeliness of Financial Statements Disclosure.
Audit Committee and Internal Audit and the Quality of Earnings: Empirical Evidence from Spanish Companies. The role of the audit committee and the informativeness of accounting earnings in East Asia. AUDIT REPORT TIMELINESS: AFTER TWO DECADES OF THE AUDIT COMMITTEE EXISTING IN INDONESIA Cogent Business & Management.
Your manuscript entitled "AUDIT REPORT TIMELINESS: AFTER TWO DECADES OF THE AUDIT COMMITTEE'S EXISTENCE IN INDONESIA", which you submitted to Cogent Business & Management, has now been reviewed. The reviews, included at the bottom of the letter, indicate that your manuscript may be suitable for publication after review. I suggest that the title be revised to highlight critical factors that affect the timeliness of audit report rather than the period of the AC existence.
This paper aims to examine the positive relationship between audit committee (AC) and reporting quality proximate reporting timelines in the Indonesian context. The findings of this study also suggest that the number of CA meetings is crucial to ensure its supervisory roles in the company, leading to the timely submission of audited financial statements.
Introduction
The effectiveness of the AC is measured by the size of the committee, its level of expertise or competence and the frequency of meetings. The findings show that AC size and financial expertise are not significantly related to the timeliness of the audit report, while meeting frequency does have a significant effect on it. The results indicate that AC effectiveness depends on the occurrence of communication between members.
The findings make significant contributions to the existing literature on corporate governance (CG), particularly AC effectiveness in emerging economies. This study fills research gaps on AC effectiveness and provides practical implications regarding AC financial reporting oversight. Despite findings from studies of AC in developed economies such as the United States and the United Kingdom, conditions and factors affecting AC effectiveness in developing countries such as Indonesia may vary.
AC, as one of the critical components of CG, can expect both delay and Sakka & Jarboui (2016) suggest that good CG structures will improve the quality of timeliness of reports. First, the study provides literature on a new perspective on AC effectiveness and provides practical implications regarding AC review of financial reporting. Although there is a large body of literature on CG and AC (see DeZoort et al., 2002; Turley and Zaman, 2004), most research is predominantly conducted in the context of developed economies such as the USA and the UK, so the findings of this study may not apply. to other economies that have different contextual environments (Collier & Zaman, 2005; Zaman, Hudaib, & Haniffa, 2011).
This is supported by one of the previous studies stating that AC is related to the quality of accounting information in different economies (Woidtke & Yeh, 2013). This study will focus on the performance of AC in the context of developing countries in Asia, particularly Indonesia. Second, this study contributes to practice in the way that robust regulation of AC is needed.
The establishment of the AC in some companies in developing countries is sometimes just to respect the regulations, but they do not fully adhere to it in the actual situation. The AC in a company is not only a CG symbol, but this structure effectively reduces the agency conflict between management and stakeholders, especially investors. Therefore, regulators can find this finding effective to formulate an excellent policy to make the AC members work well.
Background
The Market and Financial Institution Supervision Agency and IDX have been fighting to improve the CG environment in Indonesia by requiring the establishment of AC as a mandatory regulation since mid-2000. Another regulation is that the audited accounts must be submitted and published no later than 3 months after the annual accounts. Doyle and Magilke (2013) and Schmidt and Wilkins (2013) suggest that improving the timeliness of financial reporting is the regulator's priority.
Theoretical Framework
Empirical Literature Review and hypothesis Development 1. Audit Committee and Timeliness
The AC has supervisory responsibility for financial reporting, internal control and external audit activity (Turley & Zaman, 2004). Accurate supervision by the AC will ensure the quality of financial reporting indicated by its timely publication. Some previous studies such as (Abbott, Parker, & Peters, 2004; Afify, 2009; Pucheta-Martínez & De Fuentes, 2007) confirm that the AC effectiveness affects timeliness.
Pucheta-Martínez & De Fuentes (2007) find that the size of the AC affected the quality of financial reporting of Spanish companies. Previous studies have reported that the size of an AC has a significant impact on its decisions, and ACs with fewer directors have better coordination. In contrast, Salleh and Haat (2014) found no significant relationship between AC size and earnings quality.
The expertise of individual members is essential to their performance in the AC and the number of AC members with financial expertise would improve the CG (DeFond, Hann, & Hu, 2005). Previous literature suggests that the AC with accounting or financial expertise leads to financial reporting (Abernathy, Beyer, Masli, & Stefaniak, 2014; Al-Ebel, Baatwah, & Al-Musali, 2020). Dezoort, 1998) argues that the effectiveness of AC may depend on the number of public accounting experts who join the AC team.
All the AC members should have proper knowledge of accounts and finance to effectively control the financial reporting process to improve the quality of financial reporting. The frequency of committee meetings allows the AC to regularly oversee the financial reporting process. Also, study by Abbott et al. 2004) suggest that the AC's meeting frequency will have a negative impact on the probability of reinstatement.
In the same line, Chandrasegaram et al. 2013) provided evidence that there is a weak relationship between the frequency of the AC meetings and earnings manipulation as measured by discretionary accruals. Haji-Abdullah and Wan-Hussin (2015) found an insignificant relationship between the number of AC meetings and real earnings management. The AC with more frequent meetings will have more time to oversee the financial reporting process of the business.
Research Design 1. Population and Sample
Audit Committee Expertise a person with training and experience in accounting or auditing (e.g. auditor, CFO, controller or accounting officer). Our findings confirm previous research by Al-Rassas and Kamardin (2016), Haji-Abdullah and Wan-Hussin (2015), and Saleh et al. 2007) that show an insignificant relationship between audit committee size and audit quality earning (measured by different proxies). 2004) and Pucheta-Martínez &. It is also consistent with Sun et al. 2014) who find an insignificant relationship between audit committee financial expertise and real earnings management in the US.
Our results contradict the previous study by Abernathy et al. 2014) and Al-Ebel, Baatwah, & Al-Musali (2020) who find that the number of the AC and the number of committee members who have financial expertise are essential for AC effectiveness.
