TY - JOUR
T1 - Voluntary audit committee formation and agency costs
AU - FIRTH, Michael Arthur
AU - RUI, Oliver M.
PY - 2007/1/1
Y1 - 2007/1/1
N2 - 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).
AB - 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).
KW - Agency costs
KW - Audit committee
KW - Audit quality substitution effect
UR - http://commons.ln.edu.hk/sw_master/2296
UR - http://www.scopus.com/inward/record.url?scp=35948972406&partnerID=8YFLogxK
U2 - 10.1504/IJAAPE.2007.015231
DO - 10.1504/IJAAPE.2007.015231
M3 - Journal Article (refereed)
SN - 1740-8008
VL - 4
SP - 142
EP - 160
JO - International Journal of Accounting, Auditing and Performance Evaluation
JF - International Journal of Accounting, Auditing and Performance Evaluation
IS - 2
ER -