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Lookup NU author(s): Dr Habiba Al-ShaerORCiD
This is the authors' accepted manuscript of an article that has been published in its final definitive form by Emerald Publishing Limited, 2021.
For re-use rights please refer to the publisher's terms and conditions.
Purpose: This paper examines the effect of audit committee reporting, measured by the tone of audit committee disclosures, in improving financial reporting quality as proxied by earnings management. Design / Methods We focus on the textual properties of AC reports, particularly the tone of AC disclosure, and their impact on financial reporting quality proxied using real and accruals-based earnings management. For additional analysis, we use a financial reporting index and matched sample. Our analysis is based on a sample of UK FTSE 350 firms. Findings: Our analysis suggests that audit committee reports are not boilerplate but varied in language. We find audit committee reporting is negatively associated with both real and accruals-based earnings management. In our additional tests, we find a positive association between financial reporting quality index and reporting tone. Originality / value: Though the importance of AC disclosures in improving reporting quality is well recognised in policy guidelines and governance recommendations, no study has employed computer-based textual analysis of AC reports and investigated the effect of AC disclosure tone and the role it can play in achieving higher reporting quality. Research Implications: Overall, our paper provides baseline evidence for future research and policymaking and reveals that ACs reporting what they have done increases transparency and impacts on reporting quality.
Author(s): Al-Shaer H, Zaman M
Publication type: Article
Publication status: Published
Journal: Journal of Applied Accounting Research
Year: 2021
Volume: 22
Issue: 5
Pages: 780-799
Online publication date: 24/05/2021
Acceptance date: 26/04/2021
Date deposited: 26/04/2021
ISSN (print): 0967-5426
ISSN (electronic): 1758-8855
Publisher: Emerald Publishing Limited
URL: https://doi.org/10.1108/JAAR-12-2020-0243
DOI: 10.1108/JAAR-12-2020-0243
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