The Influence of Audit Committee Characteristics on Modified Audit Opinion in Jordan
Journal of Finance and Accounting
Volume 7, Issue 3, May 2019, Pages: 95-106
Received: Apr. 27, 2019; Accepted: Jun. 11, 2019; Published: Jul. 4, 2019
Views 67      Downloads 67
Saleh Zaid Alkilani, Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia, Sintok, Malaysia
Wan Nordin Wan Hussin, Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia, Sintok, Malaysia
Basariah Salim, Tunku Intan Shafinaz Accounting School, Universiti Utara Malaysia, Sintok, Malaysia
Article Tools
Follow on us
The Jordanian Corporate Governance Code (JCGC) was first enacted in 2004 and revised in 2017. It offers standards for ethical and decent practices in the corporates. Law in Jordan in 2009 has enforced the formation of an audit committee for all listed companies. Literature has substantiated that the audit committee characteristic (ACCs) impact the quality of financial reporting. This work investigates the role of ACCs in lessening the prospect of corporates in obtaining modified audit opinion in the context of Jordan. Four ACC problems (expertise, independent, meeting, and size) have been studied and the modified audit opinion. The total sample of 117 listed companies on the Amman Stock Exchange (ASE) was studied. The relationship between the modified audit opinions (dependent variable), and ACCs (expertise, independent, meeting, and size; as independent variables) was analyzed using logistic regression. The ACCs is projected to effectively improve the quality of financial reporting, and thus, decrease the prospect of corporate in obtaining modified audit opinion. The findings according to the listed companies from 2012 to 2017 in Jordan showed that audit committee (AC) expertise validates this likelihood. Lastly, there is no effect of AC independent, size, and the number of meetings held on the modified audit opinion. General, the findings have policy implications on enhancing corporate governance (CG) efficacy concerning the quality of financial reporting.
Audit Committee, Corporate Governance Guide, Modified Audit Opinion, Type of Auditor’s Report
To cite this article
Saleh Zaid Alkilani, Wan Nordin Wan Hussin, Basariah Salim, The Influence of Audit Committee Characteristics on Modified Audit Opinion in Jordan, Journal of Finance and Accounting. Vol. 7, No. 3, 2019, pp. 95-106. doi: 10.11648/j.jfa.20190703.14
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License ( which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Bronson, S. N., Carcello, J. V., Hollingsworth, C. W., & Neal, T. L. (2009). Are fully independent audit committees really necessary?. Journal of Accounting and Public Policy, 28 (4), 265-280.
Geiger, M. A., Raghunandan, K., & Riccardi, W. (2013). The global financial crisis: US bankruptcies and going-concern audit opinions. Accounting Horizons, 28 (1), 59-75.
Ellen, A., Angelina, C., & Fenella, J. (2019). The Analysis of Auditor Opinion After Financial Crisis. KnE Social Sciences, 3 (11), 257-269.
García, L. S., Barbadillo, E. R., & Pérez, M. O. (2012). Audit committee and internal audit and the quality of earnings: empirical evidence from Spanish companies. Journal of Management & Governance, 16 (2), 305-331.
Farinha, J., & Viana, L. F. (2009). Board structure and modified audit opinions: evidence from the Portuguese stock exchange. International Journal of Auditing, 13 (3), 237-258.
Kibiya, M. U., Che-Ahmad, A., & Amran, N. A. (2016). Audit committee independence, financial expertise, share ownership, and financial reporting quality: further evidence from Nigeria. International Journal of Economics and Financial Issues, 6 (7S), 125-131.
Bajra, U., & Čadež, S. (2018). Audit committees and financial reporting quality: The 8th EU Company Law Directive perspective. Economic Systems, 42 (1), 151-163.
Khlif, H., & Samaha, K. (2016). Audit committee activity and internal control quality in Egypt: Does external auditor’s size matter?. Managerial Auditing Journal, 31 (3), 269-289.
Kusnadi, Y., Leong, K. S., Suwardy, T., & Wang, J. (2016). Audit committees and financial reporting quality in Singapore. Journal of business ethics, 139 (1), 197-214.
Abu Qa’dan, M. B., & Suwaidan, M. S. (2019). Board composition, ownership structure and corporate social responsibility disclosure: the case of Jordan. Social Responsibility Journal, 15 (1), 28-46.
Habib, A. (2013). A meta-analysis of the determinants of modified audit opinion decisions. Managerial Auditing Journal, 28 (3), 184-216.
Moalla, H. (2017). Audit report qualification/modification: Impact of financial variables in Tunisia. Journal of Accounting in Emerging Economies, 7 (4), 468-485.
Bédard, J., Coram, P., Espahbodi, R., & Mock, T. J. (2016). Does recent academic research support changes to audit reporting standards?. Accounting Horizons, 30 (2), 255-275.
Alzoubi, E. S. S. (2019). Audit committee, internal audit function, and earnings management: evidence from Jordan. Meditari Accountancy Research, 27 (1), 72-90.
de Andrés Suárez, J., García, E. C., Méndez, C. F., & Gutiérrez, C. R. (2013). The effectiveness of the audit committee in Spain: implications of its existence on the auditor’s opinion. SERIEs, 4 (3), 333-352.
De Vlaminck, N., & Sarens, G. (2015). The relationship between audit committee characteristics and financial statement quality: evidence from Belgium. Journal of Management & Governance, 19 (1), 145-166.
Garcia-Blandon, J., Argilés-Bosch, J. M., Martinez-Blasco, M., & Merino, D. C. (2018). On the relationship between compliance with recommendations on the audit committee of codes of good practices and financial reporting quality. Journal of Management and Governance, 1-26.
Zgarni, I., Hlioui, K., & Zehri, F. (2016). Effective audit committee, audit quality, and earnings management: Evidence from Tunisia. Journal of Accounting in Emerging Economies, 6 (2), 138-155.
Sultana, N., & Mitchell Van der Zahn, J. L. (2015). Earnings conservatism and audit committee financial expertise. Accounting & Finance, 55 (1), 279-310.
Cohen, J. R., Hoitash, U., Krishnamoorthy, G., & Wright, A. M. (2013). The effect of audit committee industry expertise on monitoring the financial reporting process. The Accounting Reopinion, 89 (1), 243-273.
Salehi, M., & Shirazi, M. (2016). Audit committee impact on the quality of financial reporting and disclosure: Evidence from the tehran stock exchange. Management Research Reopinion, 39 (12), 1639-1662.
Buallay, A. M., & AlDhaen, E. S. (2018). The Relationship Between Audit Committee Characteristics and the Level of Sustainability Report Disclosure. In Conference on e-Business, e-Services and e-Society (pp. 492-503). Springer, Cham.
Chen, S., & Komal, B. (2018). Audit committee financial expertise and earnings quality: A meta-analysis. Journal of Business Research, 84, 253-270.
Badolato, P. G., Donelson, D. C., & Ege, M. (2014). Audit committee financial expertise and earnings management: The role of status. Journal of Accounting and Economics, 58 (2-3), 208-230.
Hamdan, A. M., Mushtaha, S., & Musleh Al-Sartawi, A. (2013). The audit committee characteristics and earnings quality: Evidence from Jordan.
Al-Smadi, M. O. (2019). Corporate Governance and Risk Taking Of Jordanian Listed Corporations: The Impact of Board of Directors. Investment Management and Financial Innovations, 16, 1.
Shbeilat, M. K. (2019). International Standard on Auditing No. 260 and Audit Quality: Evidence from Jordan. International Business Research, 12 (4).
Al-Khaddash, H., Al Nawas, R., & Ramadan, A. (2013). Factors affecting the quality of auditing: The case of Jordanian commercial banks. International Journal of Business and Social Science, 4 (11).
Abdullatif, M. (2006). The effectiveness of audit committees in Jordanian public shareholding companies and potential company characteristics affecting it: perceptions from auditors in Jordan. Dirasat: Administrative Sciences, 33 (2), 450-467.
Swaiti, M. (2006). A Proposed Model for the Role of Audit Committees in the Jordanian Public Shareholding Companies, and their Influence on the Effectiveness and Independence of External Audit. Unpublished Ph. D Thesis, Amman Arab University–Jordan.
Al-Khadash, H. A., & Al-Sartawi, A. A. M. (2010). The Capability of the Sarbanes-Oxley Act in Enhancing the Independence of the Jordanian Certified Public Accountant and its Impact on Reducing the Audit Expectation Gap" An Empirical Investigation from the Perspectives of Auditors and Institutional Investors". Jordan Journal of Business Administration, 6 (3).
Alqatamin, R. M. (2018). Audit Committee Effectiveness and Company Performance: Evidence from Jordan. Accounting and Finance Research, 7 (2), 48.
Danescu, T., & Spatacean, O. (2018). Audit opinion impact in the investors’ perception–empirical evidence on Bucharest Stock Exchange. Audit Financiar, 16 (149), 111-121.
Pucheta-Martínez, M. C., & García‐Meca, E. (2014). Institutional investors on boards and audit committees and their effects on financial reporting quality. Corporate Governance: An International Review, 22 (4), 347-363.
Pucheta-Martínez, M. C., Bel-Oms, I., & Olcina-Sempere, G. (2016). Corporate governance, female directors and quality of financial information. Business Ethics: A European Reopinion, 25 (4), 363-385.
Carcello, J. V., & Neal, T. L. (2000). Audit committee composition and auditor reporting. The Accounting Reopinion, 75 (4), 453-467.
Pedro Sánchez Ballesta, J., & Garcia-Meca, E. (2005). Audit qualifications and corporate governance in Spanish listed firms. Managerial Auditing Journal, 20 (7), 725-738.
Pucheta-Martínez, M. C., & De Fuentes, C. (2007). The impact of audit committee characteristics on the enhancement of the quality of financial reporting: An empirical study in the Spanish context. Corporate Governance: An International Reopinion, 15 (6), 1394-1412.
Sultana, N. (2015). Audit committee characteristics and accounting conservatism. International Journal of Auditing, 19 (2), 88-102.
Al-Jaifi, H. A., Al-Rassas, A. H., & Al-Qadasi, A. (2019). Institutional investor preferences: Do internal auditing function and audit committee effectiveness matter in Malaysia?. Management Research Review.
García, L. S., Barbadillo, E. R., & Pérez, M. O. (2019). Analysis of the Influence of the Internal Audit Function on Audit Fees. Revista de Contabilidad-Spanish Accounting Review, 22 (1), 100-111.
Bataineh, H., Abuaddous, M., & Alabood, E. (2018). The Effect of Family Ownership and Board Characteristics on Earnings Management: Evidence from Jordan. Academy of Accounting and Financial Studies Journal.
Boolaky, P. K., & Quick, R. (2016). Bank directors’ perceptions of expanded auditor's reports. International Journal of Auditing, 20 (2), 158-174.
Sirois, L. P., Bédard, J., & Bera, P. (2018). The informational value of key audit matters in the auditor's report: Evidence from an eye-tracking study. Accounting Horizons, 32 (2), 141-162.
Czerney, K., Schmidt, J. J., & Thompson, A. M. (2019). Do investors respond to explanatory language included in unqualified audit reports?. Contemporary Accounting Research, 36 (1), 198-229.
Al-Othman, L. N. (2019). The Reaction Of The Financial Market On The Auditor Report: An Empirical Study On Service Companies Listed In Amman Stock Exchange (ASE). Investment Management and Financial Innovations, 16, 1.
Al-Thuneibat, A. A., Khamees, B. A., & Al-Fayoumi, N. A. (2007). The effect of qualified auditors' opinions on share prices: evidence from Jordan. Managerial Auditing Journal, 23 (1), 84-101.
Bruynseels, L., & Cardinaels, E. (2014). The audit committee: Management watchdog or personal friend of the CEO?. The Accounting Reopinion, 89 (1), 113-145.
DeFond, M. L., & Francis, J. R. (2005). Audit research after sarbanes-oxley. Auditing: A Journal of Practice & Theory, 24 (s-1), 5-30.
Cohen, J. R., Krishnamoorthy, G., & Wright, A. M. (2008). Form versus substance: The implications for auditing practice and research of alternative perspectives on corporate governance. Auditing: A Journal of Practice & Theory, 27 (2), 181-198.
Chen, J. J., & Zhang, H. (2014). The impact of the corporate governance code on earnings management–Evidence from Chinese listed companies. European Financial Management, 20 (3), 596-632.
Carcello, J. V., & Neal, T. L. (2003). Audit committee characteristics and auditor dismissals following “new” going-concern reports. The Accounting Reopinion, 78 (1), 95-117.
Hayes, R. M. (2014). Discussion of “Audit committee financial expertise and earnings management: Journal of Accounting and Economics, 58 (2-3), 231-239.
García Osma, B. G., & Noguer, B. G. D. A. (2007). The effect of the board composition and its monitoring committees on earnings management: Evidence from Spain. Corporate Governance: An International Reopinion, 15 (6), 1413-1428.
Bédard, J., & Gendron, Y. (2010). Strengthening the financial reporting system: Can audit committees deliver?. International journal of auditing, 14 (2), 174-210.
Li, J., Mangena, M., & Pike, R. (2012). The effect of audit committee characteristics on intellectual capital disclosure. The British Accounting Reopinion, 44 (2), 98-110.
Mohd Saleh, N., Mohd Iskandar, T., & Mohid Rahmat, M. (2007). Audit committee characteristics and earnings management: Evidence from Malaysia. Asian Reopinion of Accounting, 15 (2), 147-163.
Bédard, J., Chtourou, S. M., & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: A Journal of Practice & Theory, 23 (2), 13-35.
DeFond, M., & Zhang, J. (2014). A reopinion of archival auditing research. Journal of Accounting and Economics, 58 (2-3), 275-326.
Krishnan, G. V., & Visvanathan, G. (2008). Does the SOX definition of an accounting expert matter? The association between audit committee directors' accounting expertise and accounting conservatism. Contemporary Accounting Research, 25 (3), 827-858.
Sierra, G. L,. Barbadillo, E. R,. Orta Pe´rez, M. (2012). Audit committee and internal audit and the quality of earnings: empirical evidence from Spanish companies. DOI 10.1007/s10997-010-9152-3.
Allegrini, M., & Greco, G. (2013). Corporate boards, audit committees and voluntary disclosure: Evidence from Italian listed companies. Journal of Management & Governance, 17 (1), 187-216.
Oussii, A. A., & Boulila Taktak, N. (2018). Audit committee effectiveness and financial reporting timeliness: The case of Tunisian listed companies. African Journal of Economic and Management Studies, 9 (1), 34-55.
Dhaliwal, D. A. N., Naiker, V. I. C., & Navissi, F. (2010). The association between accruals quality and the characteristics of accounting experts and mix of expertise on audit committees. Contemporary Accounting Research, 27 (3), 787-827.
Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of accounting and economics, 33 (3), 375-400.
Rainsbury, E. A., Bradbury, M., & Cahan, S. F. (2009). The impact of audit committee quality on financial reporting quality and audit fees. Journal of Contemporary Accounting & Economics, 5 (1), 20-33.
Salloum, C., Azzi, G., & Gebrayel, E. (2014). Audit committee and financial distress in the middle east context: Evidence of the Lebanese financial institutions. International Strategic Management Reopinion, 2 (1), 39-45.
Salleh, Z., & Stewart, J. (2012). The role of the audit committee in resolving auditor-client disagreements: a Malaysian study. Accounting, Auditing & Accountability Journal, 25 (8), 1340-1372.
Alzoubi, E. S. S. (2018). Audit quality, debt financing, and earnings management: Evidence from Jordan. Journal of International Accounting, Auditing and Taxation, 30, 69-84.
Alabdullah, T. T. Y., Yahya, S., & Ramayah, T. (2014). Corporate governance mechanisms and Jordanian companies' financial performance. Asian Social Science, 10 (22), 247.
Fakhfakh, H., & Fakhfakh, M. (2010). The impact of Revised ISA 700: an international empirical comparison. International Journal of Accounting, Auditing and Performance Evaluation, 6 (2-3), 274-326.
Gold, A., Gronewold, U., & Pott, C. (2012). The ISA 700 auditor's report and the audit expectation gap–do explanations matter?. International Journal of Auditing, 16 (3), 286-307.
Midi, H., Sarkar, S. K., & Rana, S. (2010). Collinearity diagnostics of binary logistic regression model. Journal of Interdisciplinary Mathematics, 13 (3), 253-267.
Baxter, P., & Cotter, J. (2009). Audit committees and earnings quality. Accounting & Finance, 49 (2), 267-290.
Tsipouridou, M., & Spathis, C. (2014). Audit opinion and earnings management: Evidence from Greece. In Accounting Forum (Vol. 38, No. 1, pp. 38-54). Elsevier.
Firth, M., Fung, P. M., & Rui, O. M. (2007). Ownership, two-tier board structure, and the informativeness of earnings–Evidence from China. Journal of accounting and public policy, 26 (4), 463-496.
Ishak, S., Yusof, M., & Atef, M. (2013). The formation of separate risk management committee and the effect on modified audit report. Malaysian Management Journal (MMJ), 17, 43-58.
Chen, F., Peng, S., Xue, S., Yang, Z., & Ye, F. (2016). Do Audit Clients Successfully Engage in Opinion Shopping? Partner Level Evidence. Journal of Accounting Research, 54 (1), 79-112.
Fang, J., Lobo, G. J., Zhang, Y., & Zhao, Y. (2018). Auditing related party transactions: evidence from audit opinions and restatements. Auditing: A Journal of Practice & Theory, 37 (2), 73-106.
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
Tel: (001)347-983-5186