Voluntary audit committee formation and agency costs
Document Type
Journal article
Source Publication
International Journal of Accounting, Auditing and Performance Evaluation
Publication Date
1-1-2007
Volume
4
Issue
2
First Page
142
Last Page
160
Keywords
Agency costs, Audit committee, Audit quality substitution effect
Abstract
This paper finds that only a small proportion of listed companies in Hong Kong voluntarily establish audit committees prior to the implementation of the revised Code of Best Practice, which effectively mandated them. We show that firms with dispersed ownership, a greater proportion of outside directors, and that have a non-Big Five auditor, are associated with the voluntary adoption of audit committees. The latter result differs from other studies and it suggests that audit committees are a substitute mechanism for the employment of high quality auditors (using the Big Five as a proxy for high quality).
DOI
10.1504/IJAAPE.2007.015231
Print ISSN
17408008
E-ISSN
17408016
Publisher Statement
Copyright © Springer 2006
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Firth, M., & Rui, O. M. (2007). Voluntary audit committee formation and agency costs. International Journal of Accounting, Auditing and Performance Evaluation, 4(2), 142-160. doi: 10.1504/IJAAPE.2007.015231