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Aims to investigate the extent of the effectiveness of monitoring functions of board of directors, audit committee and concentrated ownership in reducing earnings management among 97 firms listed on the Main Board of Bursa Malaysia over the period 2002‐2003.

The current study employs the cross‐sectional modified version of Jones, where abnormal working capital accruals are used as proxy for earnings management.

The study reveals that earnings management is positively related to the size of the board of directors. This supports the view that larger boards appear to be ineffective in their oversight duties relative to smaller boards. A possible explanation for the insignificant relationship between other corporate governance mechanisms (independence of board and audit committee) and earnings management is that the board of directors is seen as ineffective in discharging their monitoring duties due to management dominance over board matters. The apparent reason for this phenomenon is attributed to the board of directors' relative lack of knowledge in company's affairs. The study also found that ethnicity (race) has no effect in mitigating earnings management, possibly due to the more individualistic behaviour of the Bumiputra directors. The modernisation of Malaysia and also the increase in Bumiputra ownership of national wealth may have caused the Malays to be more individualistic, similar to their Chinese counterpart.

Since, there are relatively few studies conducted in this area specifically among Malaysian firms, this study will broaden the scope by providing empirical evidence of the relationship between various corporate governance characteristics, cultural factors and earnings management.

The case is appropriate for courses in financial accounting and reporting, audit and assurance, forensic accounting, accounting practice and regulations and corporate governance. After studying the case, students should be able to explain the concept of control and power under IFRS; explain the concept of economic; discuss audit committee and external auditor independence issues and ways to strengthen auditor’s independence; assess the usefulness of the new extended audit report; and evaluate the role of gatekeepers such as financial analysts, audit committee, external auditor, institutional investors and regulators in enhancing the quality of financial reporting.

This case focuses on the accounting policy choices of the foreign associates of AirAsia Berhad. AirAsia Berhad is a phenomenal success, from a debt laden company to having been voted as World’s Best Low-Cost Airline in the annual World Airline Survey by Skytrax for eight consecutive years from 2009 to 2016 and the World’s Leading Low-Cost Airline in the annual World Travel Awards for four consecutive years from 2013 to 2016. In June 2015, an analyst report was leaked, and it led to heated discussion and exchanges in the market. The report questioned the non-consolidation of AirAsia Berhad associates. The share market also reacted. Various players in the market came into foray with their statements and opinions on the merit of the accounting policy choice by AirAsia Berhad. Whose views actually reflect the nature of accounting policy choice that is true and fair? Are these gatekeepers attesting to the accounting crux of substance over form?

Senior undergraduates; MBA; EMBA

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CSS: 1: Accounting and Finance

The case “Corporate Governance Failure at Ricoh India: Rebuilding Lost Trust” discusses the series of events post disclosure of falsification of the accounts and violation of accounting principles, leading to a loss of INR 11.23bn for the company, eroding over 75 per cent of its market cap (Financial Express, 2016). The case provides an opportunity for students to understand the key components of corporate governance structure and consequences of poor corporate governance. The case highlights the responsibility of the board of directors, audit committee and external auditors and discusses the changes required in the corporate governance structure necessary to ensure that such incidents do not take place. The case also delves into the classic dilemma of degree of control that needs to be exercised by the parent over its subsidiaries and freedom of independence given to the subsidiary board, which is a constant challenge all multinationals face. Such a dilemma often leads to the challenge of creating appropriate corporate governance structures for numerous subsidiaries.

The case is intended for MBA courses on corporate governance, business ethics and also for the strategic management courses in the context of multinational corporations. The case can be used to develop an understanding of the essential of corporate governance with special focus on the role of the board of directors, audit committee and external auditors. The case highlights the consequences and cost of poor corporate governance. The case can also be used for highlighting governance challenges in the parent subsidiary relationship for multinational corporations. The case can be used for executive training purposes on corporate governance and leadership with special focus on business ethics.

This case presents the challenges faced by the newly appointed Chairman Noboru Akahane of Ricoh India. In July 2016, Ricoh India, the Indian arm of Japanese firm Ricoh, admitted that the company’s accounts had been falsified and accounting principles violated, leading to a loss of INR 11.23 bn for the financial year 2016. The minority shareholders were agitating against the board of directors of Ricoh India and were also holding the parent company responsible for not safeguarding their interest. Over a period of 18 months, Ricoh India had been in the eye of a storm that involved delayed reporting of financials, auditor red flags regarding accounting irregularities, a forensic audit, suspension of top officials and a police complaint lodged by Ricoh India against its own officials. Akahane needed to ensure continuity of Ricoh India’s business and also act quickly and decisively to manage the crisis and ensure that these incidents did not recur in the future.

The case provides an opportunity for students to understand the key components of corporate governance structure and consequences of poor corporate governance. More specifically, the case addresses the following objectives: provide an overview of corporate governance structure; highlight the role of board of directors, audit committee and external auditors; appreciate the rationale behind mandatory auditor rotation; appreciate the consequences of poor corporate structure; explore the interrelationship between sustainability reporting and transparency in financial disclosures of a corporation; understand management and governance of subsidiaries by multinational companies; and understand the response to a crisis situation.

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CSS 11: Strategy.

The Managerial Auditing Journal (MAJ) started publication in 1986 and celebrates its 35th year of publication in 2020. The purpose of this study is to provide a detailed bibliometric analysis of the journal’s primary trends and themes between 1986 and 2019.

This study uses the Scopus database to analyse the most prolific authors in the MAJ along with their affiliated institutions and countries; the work also identifies the MAJ articles cited most often by other journals. A range of bibliometric devices is applied to analyse the publication and citation structure of MAJ, alongside performance analysis and science mapping tools. The study also provides a detailed inter-temporal analysis of MAJ publishing patterns.

The MAJ publishes around 40 articles each year with citations of this work steadily growing over time. The journal has attracted contributors from around the globe, most often affiliated with the USA, the UK and Australia. Thematic evolution of the journal’s themes reveals that it has expanded its scope to include topics such as internal auditing, internal control and corporate governance, whilst co-authorship analysis reveals that the journal’s collaboration network has grown to span the globe.

As this study uses data from the Scopus database, any shortcomings therein will be reflected in the study.

This study provides the first overview of the MAJ’s publication and citation trends as well as the evolution of its thematic structure. It also suggests future directions that the journal might take.

This chapter examines corporate governance–related financial reporting issues in the context of globalization. Over the past few decades, the process of globalization has substantially altered the fields of corporate governance and accounting. More specifically, Anglo-American models of corporate governance and financial reporting have received increasing momentum in emerging economies, including China. However, a review of relevant studies suggests that there is limited research examining the implementation of Anglo-American concepts in various countries regardless of their growing acceptance. This monograph extends the existing literature by comprehensively investigating the adoption of internationally acceptable principles and standards in China, the largest transitional economy that has different institutional context from Anglo-American countries. In addition, the review has a number of implications for developing the theoretical framework, and determining the research methodology for the monograph.

The principles of sustainable development argue that organizations should make decisions not only based on economic or financial factors but also based on the long-term social and environmental consequences. The Code on Corporate Governance is one of the drivers for corporate social responsibility (CSR) reporting in Malaysia. Additionally, the way managers execute their responsibilities may be affected by their own tradition, beliefs, values, and culture. Thus, this chapter aims to examine the relationship between corporate governance characteristics and CSR disclosure and to investigate the influence of cultural values (Board’s Culture Domination) on the relationship between corporate governance and corporate social responsibility. A sample of 150 companies from the main board of Bursa Malaysia for year ended 2006 are chosen for the purpose of this study due to the year of the introduction of Bursa Malaysia CSR Framework. Based on available data, a CSR index is constructed. Hierarchical regression analysis is used to examine the relationship between the CSR disclosure index and the independent variables and also the moderating effect of Board’s Culture Domination. Results show that government ownership and audit committees have a positive and significant influence on CSR disclosure. Furthermore, the findings show that the Board’s Culture Domination moderate the relationship between audit committee, number of shareholders, foreign ownership, and CSR disclosure.

Recent accounting literature and Agency theory have predicted that corporate governance assists the convergence of interests between shareholders and managers, and thus enhances the quality of financial reporting. This chapter discusses some of the empirical studies on corporate governance in Saudi Arabia; it also elaborates on the corporate governance regulations introduced by Capital Market Authority in Saudi Arabia. Studies cover various subjects that interact with corporate governance, such as earnings management, corporate social responsibility disclosure, ownership structure, environmental disclosure and voluntary disclosure in annual reports of Saudi's listed firms. It also discusses the effectiveness and determinants of corporate governance structures, such as the board of directors, audit committee and other sub-committees. Results were generally in line with previous research from the developed countries, but sometimes there are contradictions, and these results have been discussed and explained, and implications to regulators and investors are drawn where possible.

The chapter focuses on the personal characteristics of top executives in companies involved in corporate financial crime as well as the introduction of human governance as one of the mechanisms in preventing corporate misbehaviour. This chapter discusses directors’ and top management teams’ personal characteristics – in the context of corporate governance – that may influence the occurrence of corporate financial crime. The study further proposes the human governance factor as a possible mechanism to improve corporate governance in preventing such misbehaviour. This chapter highlights the personal characteristics of top executives, which may become the indicators of corporate financial crime, as well as human governance, which is shown to be one of the most important mechanisms of corporate governance for corporate financial crime prevention.

This study attempts to provide evidence on earnings management of Indonesian firms one year prior to going public. The focus of this study is abnormal portion of accruals. These accruals are estimated using methodologies proposed by Dechow et al. (1995), and Kothari et al. (2005). This study finds no evidence that, on average, Indonesian firms manipulate their reported earnings to obtain higher proceeds from their IPOs. The findings stand even after size and leverage levels are considered in evaluating the incidences of earnings managements prior to IPOs. These findings support the arguments of Watts (2003) that empirical evidences show that public firms utilize conservative accounting and the practice becomes more conservative lately. It is also in line with Ball and Shivakumar’s argument (2005 and 2006) that the demand, for higher quality financial reports from public investors, forces IPO firms to improve their reporting quality prior to IPO and that regulation of publicly‐listed companies imposes greater requirements than non‐listed companies.