The Relationship Between The Key Characteristics Of The Audit Committee Chair And Financial Reporting Quality

In the legislation and practice of corporate governance in various countries,the establishment of audit committee by the board of directors is an important governance mechanism,which aims to supervise the external audit work and financial reporting process,and alleviate the agency problem caused by the separation of ownership and control.Since the 1990 s,in order to deal with the financial fraud scandal,domestic and foreign regulatory agencies have issued a series of rules and regulations to make mandatory provisions on the responsibilities of the audit committee,the qualifications of the members and other details,making the audit committee system increasingly perfect.The quality of corporate financial report is a function of three variables: the quality of external audit,the quality of corporate financial report system and the internal characteristics of enterprises.The main responsibilities of the Audit Committee include supervising the external audit,auditing the financial information of the enterprise and guiding the internal control of its disclosure,but the core is to ensure the quality of the financial report.In the newly revised corporate governance standards for listed companies in 2018,the qualifications of audit committee chairs are emphasized.It shows that regulators begin to attach great importance to the special role of audit committee chair.The audit committee chair is the "cornerstone" of the operation of the audit committee.To a great extent,the governance performance of audit committee depends on the role of the chair.The audit committee chair is responsible for ensuring that the audit committee receives the necessary information,resources and work support to achieve the important objectives of monitoring the financial reporting quality.Specifically,the audit committee chair is responsible for organizing and presiding over the meetings of the audit committee and coordinating the implementation of various responsibilities of the audit committee.He is the core person who maintains communication with the CFO,external auditors and other key personnel of the company in the process of preparing and disclosing financial reports,and bears more important supervision responsibility.The high echelon theory holds that the characteristics of influential individuals in an organization will affect the output of the whole organization.The key characteristics of the audit committee chair,such as accounting professional ability,organizational status and geographical distance,directly affect the professionalism,independence and information acquisition efficiency of the audit committee.However,due to the lack of a perfect information disclosure mechanism of the performance of audit committee in China,it is difficult to obtain relevant data,so that there are only a few academic researches on the performance of the audit committee chairs.From the perspective of the key characteristics of the chair of the audit committee,this paper collects relevant data mainly through manual collection and supplemented by crawler acquisition,mainly to test the relationship between the key characteristics of the audit committee chair,such as accounting professional ability,organizational status,geographical distance and the financial reporting quality,as well as the mediation effect of the audit committee meeting on the above key characteristics of the audit committee chair and the financial reporting quality.This paper takes A-share listed companies of Shanghai and Shenzhen main board in 2008-2016 as the research object,and the main research conclusions are as follows:First,the audit committee chair with strong accounting professional ability can effectively curb the company’s accrual and real earnings management behavior,improve the financial reporting quality,and the number of regulatory inquiry letters received by the company reduced correspondingly.There is an mediation effect between the accounting professional ability of the audit committee chair and the financial reporting quality in the audit committee meeting,which indicates that the audit committee chair with strong accounting professional ability can find more potential financial problems,and through convening and presiding over the audit committee meeting,summarizing and handling the problems and information found,report the meeting results to the board of directors with professional opinions,so as to attract the attention of the board of directors to relevant financial problems.Second,the audit committee chair with high organizational status can effectively curb the company’s accrual and real earnings management behavior,improve the financial reporting quality,and the number of regulatory inquiry letters received by the company is correspondingly reduced.There is an mediation effect between the organizational status of the audit committee chair and the financial reporting quality in the audit committee meeting,which shows that the audit committee chair with high organizational status can smoothly obtain more information of the company,and can form independent and professional opinions by holding and presiding over the audit committee meeting,and submit the information to the board of directors smoothly.Third,the local audit committee chair helps to reduce the company’s accrual and real earnings management behavior,improve the financial reporting quality,and reduce the number of regulatory inquiries received by the company.We also use the method of PSM+DID to solve the endogenous problem of China’s high-speed train operation data control.The research finds that the opening of high-speed railway promotes the information exchange of Companies in other places and helps to improve the performance of audit committee chairs in other places.There is an mediation effect between the geographic distance of the audit committee chair and the quality of the financial report in the audit committee meeting,which shows that the local audit committee chair has the advantage of information acquisition and can obtain a large number of "hard" and "soft" information of the company.These informations is mainly summarized and processed through the way of holding the audit committee meeting,and professional opinions are formed and provided to the board of directors.The main contributions of this paper are as follows: first,it is helpful to deepen and expand the research on the governance effect of audit committee from the perspective of the key characteristics of the audit committee chair.The characteristics of audit committee chair’s accounting professional ability,organizational status and geographical distance directly affect the audit committee chair’s ability,cost and efficiency of obtaining information.However,there are few studies on the key characteristics of the audit committee chairs.This paper empirically tests the relationship between the key characteristics of the audit committee chair’s accounting professional ability,organizational status,geographical distance and the financial reporting quality,which can enrich and expand the research on the governance of audit committee.Second,it is helpful to deepen and expand the relevant research on the function mechanism of the audit committee chair from the perspective of the chair’s performance path.The convening of the audit committee meeting can directly reflect the performance of the chair,but there is little research in this area.This paper makes an empirical study of the mediating effect of the audit committee chair’s holding of meetings on its key characteristics and the financial reporting quality,and further explores the mechanism of the audit committee chair’s role in corporate governance.Third,it is conducive to promoting the theoretical research and innovation of corporate governance.The review of the company’s regular report,the communication with the company and external auditors in the process of annual report audit,as well as related transactions,external guarantees,profit distribution,major investment and financing decisions and other matters related to the interests of the company and its stakeholders,all require the members of the audit committee,especially the chair,to express independent and professional opinions and perform the supervision function.Therefore,the research on the performance and mechanism of the audit committee chair’s governance will undoubtedly contribute to the continuous innovation of the theoretical research on corporate governance.