Articlediamond2017

Effects of the audit committee and the fiscal council on earnings quality in Brazil

Vitor Gomes Baioco · José Elias Feres de Almeida

38 citations0/0 files storedRevista Contabilidade & Finanças

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

ABSTRACT This study evaluates the effects of the audit committee and the fiscal council with their different characteristics on earnings quality in Brazil. The proxies of earnings quality used are: relevance of accounting information, timeliness, and conditional conservatism. The sample consists of Brazilian companies listed on the Brazilian Securities, Commodities, and Futures Exchange (BM&FBOVESPA) with annual liquidity above 0.001 within the period from 2010 to 2013. Data were collected from the database Comdinheiro and the Reference Forms of companies available on the website of the Brazilian Securities and Exchange Commission (CVM) or the BM&FBOVESPA. The samples used in the study totaled 718, 688, and 722 observations for the value relevance, timeliness, and conditional conservatism models, respectively. The results indicate that different arrangements of the fiscal council and the existence of the audit committee differently impact the accounting information properties. The presence of the fiscal council positively impacted the relevance of equity, while the presence of the audit committee, the relevance of earnings. Conditional conservatism is evidenced in the group of companies with a permanent fiscal council, demonstrating that it is significant as a governance mechanism, rather than the installation for temporary operation when asked by shareholders in an ordinary general meeting. The presence of both showed significant earnings for the market, but they were not timely, something which exposes restriction to the relevance found. Lastly, the powered fiscal council showed a positive association only concerning the relevance of equity.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 2002Audit committee, board of director characteristics, and earnings management 2010Understanding earnings quality: A review of the proxies, their determinants and their consequences 1996Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC*1997The conservatism principle and the asymmetric timeliness of earnings1 2008International Accounting Standards and Accounting Quality 2003Earnings management and corporate governance: the role of the board and the audit committee 2001Financial accounting information and corporate governance

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