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CAP Forum on Forensic Accounting in the Post‐Enron World: Audit Committees and Misappropriation of Assets: Publicly Held Companies in the United States */LES COMITÉS DE VÉRIFICATION ET LE DÉTOURNEMENT DE BIENS: LES SOCIÉTÉS OUVERTES AUX ÉTATS‐UNIS
Author(s) -
MUSTAFA SAMEER T.,
MEIER HEIDI HYLTON
Publication year - 2006
Publication title -
canadian accounting perspectives
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.238
H-Index - 17
eISSN - 1911-3838
pISSN - 1499-8653
DOI - 10.1506/ccww-jrwb-ecue-ymmn
Subject(s) - misappropriation , accounting , corporate governance , business , audit , audit committee , finance , law , political science
The majority of previous studies investigating the different risk factors associated with financial fraud have focused on investigating misreporting. A few studies have provided only a limited descriptive analysis of cases involving misappropriation of assets without investigating the corporate governance structure and its role in reducing the incidence of misappropriation. Only Beasley (1996) has examined financial fraud and corporate governance structure by combining cases of misreporting and misappropriation of assets by top management. This study investigates the relationship between the incidence of misappropriation of assets by employees, including management, and the effectiveness of the audit committee. Using LEXIS‐NEXIS Research Software 7.1, Business/Finance News to find relevant articles, we identified publicly held companies suffering misappropriation of assets by employees during the period from 1987 to 2000. The study investigated 81 companies experiencing misappropriation and two control samples: 81 random‐control companies and 81 matched‐control companies. The results extend the previous literature related to financial fraud and corporate governance. The percentage of independent members in audit committees and the average tenure of audit committee members were significantly and negatively related to the incidence of misappropriation of assets in publicly held companies in both the random and the matched models, while the number of audit committee meetings was not significant.