Jennifer Dorothy Stewart

Corporate governance and disclosures on the transition to International Financial Reporting Standards

For reporting periods ending on or after 30 June 2004, Australian companies were required to disclose the expected impact of applying Australian equivalents of International Financial Reporting Standards effective from 1 January 2005. The objective of this paper is to examine the association between the level of disclosure and corporate governance quality. Using a sample of listed companies with 30 June balance dates, we find that the quantity of disclosure was positively related to some aspects of superior corporate governance, such as the frequency of board and audit committee meetings and the choice of auditor.

Innate and Discretionary Accruals Quality and Corporate Governance

This paper extends previous research on the association between corporate governance mechanisms and accruals quality. We derive measures of the discretionary and innate components of accruals quality and regress them against corporate governance characteristics. For discretionary accruals, we find use of a Big 4 audit firm and a larger audit committee as the primary governance mechanisms associated with higher accruals quality. For innate accruals quality, we find that higher quality is associated with an independent board of directors, a larger, more independent and more active audit committee, and use of a Big 4 audit firm. Our findings suggest a stronger relation between sound governance mechanisms and innate accruals quality than discretionary accruals quality.

Internal audit independence and objectivity: emerging research opportunities

Purpose - The purpose of this paper is to provide a review of the recent literature on internal audit independence and objectivity and discuss opportunities for future research. The topics examined are the organizational status of internal audit, the internal auditors dual role as a provider of assurance and consulting activities, internal audits involvement in risk management, outsourcing and co-sourcing of internal audit activities, and the use of internal audit as a training ground for managers. Design/methodology/approach - The approach used in this paper is a review of the literature followed by an identification of further research opportunities. Findings - The paper summarizes the existing body of knowledge relating to internal audit independence and objectivity and identifies gaps in the literature where further research is needed. Originality/value - The paper provides researchers with a useful summary of the literature on internal audit independence and objectivity and stimulates them to engage in further research in the area.

External Auditors’ Reliance on Internal Audit: The Impact of Sourcing Arrangements and Consulting Activities

This study examines the impact of internal audit outsourcing and involvement in consulting on external auditors’ reliance on the work of internal audit. We test whether these factors influence reliance on internal audit work already undertaken and the use of internal auditors as assistants, distinguishing between control evaluation and substantive testing. Involvement in consulting impacts reliance on work undertaken and the use of internal auditors as assistants for control evaluation. External auditors make greater use of internal auditors as assistants for substantive testing when internal audit is provided in-house. Overall, external auditors use internal audit more for control evaluation tasks.

Climate Change and Financial Regulation: Challenges for the Financial Sector Following the Global Financial Crisis

Regulation has played a significant role in shaping the financial services sector in Australia over the past few decades. Regulatory changes have included the establishment of the Australian Prudential Regulation Authority (APRA), floating the Australian dollar, allowing foreign financial institutions to operate domestically, the introduction of the superannuation guarantee charge, and the removal of interest rate controls. As the economy emerges from the worst financial crisis since the Great Depression, a new force of change that is recognised as one of the most significant sources of risk and opportunity facing the business community in the foreseeable future has come to the forefront: climate change. Climate change is expected to be a significant change agent in the financial services sector as extreme weather patterns, sea level rises and atmospheric changes impact on asset values (both investment and lending), project finance and risk products. The financial services industry will particularly be affected by these developments, both as a provider of financial products (capital, credit, investment, advice and insurance) and through its powerful influence on the economy in terms of capital allocation. In addition, industry constituents will be impacted significantly by government regulation in this area (reporting, emissions trading and environmental policies) with respect to both their own business practices and those of their clients. This study reports the results of interviews conducted with senior members of the finance sector working in the sustainability area to gauge their perceptions of the challenges facing the sector with respect to climate change. Our results confirm that that regulatory intervention will be critical to climate change response gaining traction and momentum. In particular, regulatory certainty will promote engagement, especially in relation to the Carbon Pollution Reduction Scheme (CPRS), with other developments needed in terms of information disclosure, performance and remuneration, and incentive programs. Accordingly, the significant potential risks and opportunities that climate change presents to the sector, and to the broader economy, will in part be managed/realised only if a swift and significant regulatory response is achieved.