Audit committee financial expertise and misappropriation of assetsSameer T. Mustafa

University of Dubai, Dubai, United Arab Emirates, andNourhene Ben Youssef

E ´cole des Sciences de Gestion, Universite´ du Que´bec A ` Montre´al,Montre´al, Canada

AbstractPurpose – The purpose of this paper is to investigate the relationship between the financial expertise of the audit committee (AC) and the incidence of misappropriation of assets in publicly held companies in the USA. Design/methodology/approach – The sample consists of 28 publicly held companies in the USA experiencing misappropriation of assets from 1987 to 1998, as well as 28 control companies matched according to size, industry, and time period. The effectiveness of the AC’s financial expertise in reducing the occurrence of misappropriation of assets is examined by logistic models using two specific types of financial expertise: accounting and non-accounting financial expertise.Findings – The results support the notion that an independent AC member is only effective in reducing the occurrence of misappropriation of assets in publicly held companies if he/she is also a financial expert.Research limitations/implications – The paper contributes to the debate on the appropriate definition of “financial expert” and the efficacy of the financial expertise of AC members – as defined by the Sarbanes-Oxley legislation – in reducing the incidence of misappropriation of assets in publicly held companies in the USA. The paper includes only 28 cases of misappropriation of assets by employees involving collusion with an outsider, as discovered and reported in the news (i.e. newsworthy cases).Originality/value – While previous studies have drawn attention to the relationship between AC independence and misappropriation of assets, there is no empirical evidence to support or to refute the hypothesis that financial expertise has an impact on the occurrence of misappropriation of assets. This paper is the first to examine the association between the effectiveness of the AC and the occurrence of misappropriation of assets by testing the interaction between AC members’ financial expertise and their independence.

IntroductionIn response to the rise in fraud cases, the US Congress (2002) developed recommendations aimed at improving the effectiveness of the audit committee (AC) in publicly held companies in the USA. In addition to the independence of the members of the AC, Section 407 requires companies to disclose whether or not theAC include financial experts (and, if not, why not). The purpose of our paper is to investigate the relationship between the financial expertise of theACand the incidence of misappropriation of assets in publicly held in companies in the USA. This study is the first to examine the association between the effectiveness of the AC and the occurrence of misappropriation of assets by testing the interaction between AC members’ financial expertise and their independence.

Our study is closely related to current studies by Mustafa and Meier (2006) and Chapple et al. (2009) that have examined the relation between the incidence of misappropriation of assets and the effectiveness of the AC. In the USA, Mustafa and Meier (2006) found that the greater the effectiveness of the AC, the higher the percentage of independent members and the longer the average tenure of AC members, then, the lower the incidence of misappropriation of assets. In Australia and New Zealand, Chapple et al. (2009) also found that the proportion of independent directors on the AC is inversely related to the incidence of misappropriation. While both studies drew attention to the independence of AC members, there was no direct empirical evidence to support or to refute the claim that financial expertise has an impact on the misappropriation of assets.

We extend the audit committee financial expertise (ACFE) literature by examining two specific types of financial expertise: accounting (ACCFE) and non-accounting financial experts (NONACCEXP). We focus on misappropriation of assets for several reasons. Asset misappropriation cases are more common than fraudulent financial reporting, accounting for nearly 80 percent of the cases of reported fraud (Wells, 2000; Peterson and Gibson, 2002). Moreover, despite the fact that the Statement on Auditing Standards (SAS) No. 99 describes misappropriation of assets fraud as “[. . .] often perpetrated by employees in relatively small and immaterial amounts”, the evidence suggests it is economically significant. It has been estimated that 6 percent of US company revenues in 2002 were lost through fraud committed by employees (Holtfreter, 2004). In Canada, respondents[1] to a survey in 2004 estimated that 90 percent of all occupational fraud cases involved asset misappropriations with a median loss of CAD$200,000 (Association of Certified Fraud Examiners and Peltier-Rivest, 2007). The estimates of misappropriation of assets are alarming. The Association of Certified Fraud Examiners (2002) estimated that fraud costs US organizations more than $600 billion annually. Ernst and Young’s (2000) survey found that more than two-thirds of respondents have suffered from fraud in the prior 12 months, and almost one in ten have suffered more than 50 frauds. Clearly, misappropriation of assets is a significant problem for many organizations.

The paper is divided into six sections in which we:(1) define ACFE according to SOX;(2) discuss the literature on ACFE;(3) develop our research hypothesis;(4) provide the sample selection procedure and explain the variable measurementsin the research models;(5) present the descriptive statistics and the empirical results; and finally(6) state our conclusions.

Definition of financial expertiseThe US Congress (2002) introduced extensive requirements to address perceived deficiencies relating to the composition of the AC. Section 407 of SOX requires the Securities and Exchange Commission (SEC) to adopt rules mandating that the AC of a public company must disclose whether there are financial experts in the AC or not (and,

if not, why not). This requirement reflects the belief of congress that “[. . .] the effectiveness of the AC depends in part on its members’ knowledge of and experience in auditing and financial matters” (US Senate, 2002, p. 32). However, the definition of financial expertise is very narrow and controversial (Zhang et al., 2007; DeFond et al., 2005; SEC, 2003). The definition classifies individuals as financial experts if they obtain education and experience in accounting and auditing[2]. Indeed, the SEC received over 200 comment letters, many claiming that this definition is too restrictive and there are insufficient numbers of qualified candidates able and willing to fill those positions. In response, the SEC (2003) adopted a more liberal definition of financial expertise in its final rules, in which a financial expert is defined as anyone with experience in accounting, supervising financial professionals and overseeing the performance of a company (for example, chief executive officer (CEO) and board chairs).

Following Zhang et al. (2007), we classify ACFE into two groups: ACCFE and NONACCEXP.ACCFE are directorswho are predominantly experienced in accounting as certified public accountings (CPA), auditors, principal accounting officers, chief accounting officers, or any other major accounting position. NONACCEXP are directorswho are predominantly experienced as CEOs, presidents, or chair of the board in a for profit corporation, or as managing directors, partners or principals in venture financing, investment banking, or money management.

Review of the literature on ACFELimited experimental research suggests that financial expertise impacts AC members’judgments and financial reporting-related outcomes (DeZoort and Salterio, 2001; McDaniel et al., 2002). For example, McDaniel et al. (2002) found that experts tended to focus more on recurring, less-prominent issues, while financial literates focused more on non-recurring, prominent issues. The results of this paper suggested that each group may bring different perspectives to AC meetings and thereby improve financial reporting quality. However, as McDaniel et al. (2002) suggested, future researchers could examine how various types of financial experts evaluate differently the quality of financial reporting.

Using a different definition of financial expertise, a number of archival studies tested the association of ACFE and financial reporting quality. These studies measured financial reporting quality as earnings management (Xie et al., 2003; Be´dard et al., 2004) and restatement (Abbott et al., 2004; Agrawal and Chadha, 2005). Xie et al. (2003) examined the relation between discretionary accruals as a proxy for earnings management, and the background of AC members. They found that the proportion of AC members with corporate or investment banking background is negatively related to the level of earnings management. The authors concluded that an active and financially oriented AC may influence the level of earnings management.

Abbott et al. (2004) examined the impact of ACFE on financial restatements. They use a broader definition of financial expertise and include a CPA, investment banker, venture capitalist, chief financial officer (CFO), controller, or someone who has held a senior management position with financial responsibilities. They found that firms with financial

experts on the AC are less likely to experience financial reporting restatement. Using a narrower definition than Abbott et al. (2004), Be´dard et al. (2004) examined the efficacy of the Blue Ribbon Committee (BRC, 1999) recommendations about the effect of expertise on earnings management. They found that the presence of at least one financial expert is negatively associated with aggressive earnings management. They found, also, that firms with financial expertise are less likely to define the term “financial expert” narrowly. In their study, a financial expert is defined as a CPA, a certified financial analyst (CFA), or someone with “experience in finance or accounting”.

Like Abbott et al. (2004), Agrawal and Chadha (2005) found that the probability of restatement of financial statements is significantly lower when the AC has financial experts. Again, the definitions of financial expertise varied. Agrawal and Chadha (2005) defined financial expertise as direct accounting or finance background (CPA and CFA), and experience in corporate financial management (CEO, vice president finance (VPF), treasurer, and controller). However, as Braswell and Mauldin (2004) pointed out, the Agrawal and Chadha (2005) results were stronger than those of Abbott et al. (2004), which could signal that the results of the latter, using a broader definition of financial expertise, were driven by accounting expertise that had not been separately tested.

These studies suggested that financial experts on the AC may improve the quality of financial reporting. Accounting firms (PricewaterhouseCoopers, 1999), and regulators (SEC, 2003) argued that financial expertise is essential to ensure that the AC fulfill their primary responsibilities of overseeing the financial reporting process and enhancing financial reporting quality. However, the aforementioned studies used different definitions of expertise, and did not compare results across definitions (Be´dard et al., 2007). Moreover, these studies did not examine various types of financial experts (accounting vs non-accounting experts) to evaluate the quality of financial reporting. In other words, it is possible that the results of these studies were driven by only one type of expertise.

Recent research examined more closely the various conceptions of AC expertise (DeFond et al., 2005; Dhaliwal et al., 2006; Carcello et al., 2006; Zhang et al., 2007; Krishnan and Visvanathan, 2008). This new approach was motivated by debates concerning this question, especially after comparing the SEC’s initial and revised definitions of financial expertise with respect to AC membership. Most of these studiesclassified ACFE into two categories: accounting financial expertise and non-accounting financial expertise. Studies showed that various degrees of expertise are associated with market reaction to AC appointments (Dechow et al., 1996), accruals quality (Dhaliwal et al., 2006; Carcello et al., 2006), conservative accounting (Krishnan and Visvanathan, 2008), and internal control weakness (Zhang et al., 2007).

Using pre-SOX data, Dhaliwal et al. (2006) studied the association of accruals quality with three categories of financial expertise: accounting, supervisory and “finance” expertise (i.e. financial analysts). They assigned accounting expertise to AC members who currently have, or have had, work experience as CPAs, CFOs, financial controllers, or any other major accounting positions. They assigned financial expertise to AC

members who currently have, or have had, work experience as investment bankers, financial analysts, or any other financial management roles. They assigned supervisory expertise to AC members who have, or have had, work experience as CEOs or company presidents. The authors found that only accounting expertise is related to a higher quality of accruals. This finding supports the notion that the current definition of financial expertise is too broad. This paper was consistent with the empirical research of DeFond et al. (2005) which concluded that accountants will contribute accounting expertise.

DeFond et al. (2005) explored the issue of AC composition over a ten-year period preceding the passage of SOX. The authors examined three-day cumulative abnormal returns (CAR) around the announcement of 702 newly appointed outside directors assigned to ACs. They classified AC members as ACCFE (narrowly defined as in the original SEC proposal), NONACCEXP (based on inferences from the final version of SOX) and other non-financial experts (based on the lack of financial expertise under the SOX definition). They found a favorable market reaction to the appointment of directors who are accounting experts, especially when other good governance attributes exist. However, they did not find such reactions for NONACCEXP or others not in those categories (which would include non-financial experts). The authors suggested that the appointment of an accounting expert is expected to enhance corporate governance through increased monitoring. However, as Engel (2005, p. 203) mentioned, “the market reaction is an expectation of value enhancement, not a direct measure of actual or ultimate improvements associated with the appointment.” In light of this, one cannot jump to the a priori conclusion that appointing a financial expert to the AC necessarily improves corporate governance.

Between 2000 and 2002, Krishnan and Visvanathan (2008) examined whether ACCFE enhance the quality of financial reporting (measured by accounting conservatism) more than NONACCEXP. Following DeFond et al. (2005), the authors measured expertise in three ways:

(1) ACCFE are directors with experience as a CPA, auditor, principal. or chief financial officer, controller, or principle or chief accounting officer;(2) NONACCEXP are directors with experience as a CEO or president of a for-profitcorporation; and(3) non-financial experts are directors who are neither accounting nor NONACCEXP.

They documented the fact that firms with experts (narrowly defined) on their AC are more conservative in their accounting than firms without (or with a lower proportion of) experts on their AC. This finding is consistent with the monitoring explanation that the appointment of ACCFE increases the committee’s oversight. Modifying the definition used by DeFond et al. (2005), Zhang et al. (2007) showed that AC effectiveness, characterized as having more financial expertise or, more specifically, having more accounting financial expertise and non-accounting financial expertise, is an important determinant of internal control weakness.

Using post-SOX data, Carcello et al. (2006) examined the effects of ACFE on aggressive earnings management, where they define aggressive earnings management as abnormal accruals. They defined an accounting ACFE as a person with current or previous experience as a CPA, a CFO, a controller, a treasurer, or vice-president of finance. All other disclosed ACFEs are considered non-accounting ACFEs[3]. They split NONACCEXP into groups: senior business executives (e.g. CEO, president, chairman of the board, chief operating officer (COO), vice president) and other non-accountingexperts (investment bankers, venture capitalists, consultants, private investors, attorneys, and academics). They found reduced aggressive earnings management among companies having designated experts with accounting experience. Among those with non-accounting experience, they found no association for designated experts having supervisory experience (senior business experience), but did find an association for designated individuals with experience other than supervisory.

In summary, these studies (DeFond et al., 2005; Carcello et al., 2006; Dhaliwal et al.,2006; Krishnan and Visvanathan, 2008), with the exception of Zhang et al. (2007), expressly supported the SEC’s original narrow definition of expertise as opposed to the broader definition it later adopted under pressure. The prescription was to favor SOX’sand the SEC’s first narrow definition. After all, as Beresford (2005) stated, CEOs andother experts (presidents, vice presidents (VPs), etc.) rarely have knowledge of generally accepted accounting principles (GAAP) or the rules and regulations of the SEC.

Hypothesis developmentTo the best of our knowledge, the studies by Mustafa and Meier (2006) and Chapple et al. (2009) are the only studies that examined how AC effectiveness is associated with misappropriation of assets. However, these studies were restricted to measuring theeffectiveness of the AC according to the independence of AC members. Persons (2005) examined the relationship between the likelihood of financial statement fraud and certain corporate governance requirements of the SOX and the rules of the New York stock exchange and the national association of securities dealers automated quotationsmarkets. She defines directors with accounting expertise as those with a CPA, CFA, or experience in corporate financial management. The author provided two possible explanations for the insignificant results in her study of financial expertise. First,committees spend a relatively short time reviewing a company’s financial statements and control; therefore, it may be impossible that even members with expertise can discover accounting irregularities. Second, the presence of a member with expertise can lead other members to become less vigilant.

In implementing Section 407, the SEC (2003) defined “audit committee financial expert” as an individual with an understanding of financial reporting and related internal controls, but not necessarily with direct experience in that function. The issue that arises is whether AC members with less direct experience are equally effective in overseeing the financial reporting process, thus reducing the likelihood of misappropriation (Cohen et al., 2004).

Evidence in prior studies (DeFond et al., 2005; Carcello et al., 2006; Dhaliwal et al.,2006; Krishnan and Visvanathan, 2008) showed that ACFE is associated with an increased likelihood of the quality of financial reporting. These studies provided insight into which of these two types of financial expertise is more likely to be associated with the quality of financial statements. We predict in H1 that greater ACFE[4] will be associated with a lower likelihood of misappropriation of assets. H2a and H2b consider this association for accounting and non-accounting financial expertise separately. Stated formally, they are as follows:

H1. As the percentage of members with financial expertise in the AC increases, the likelihood of misappropriation of assets in publicly held companies decreases. H2a. As the percentage of memberswith accounting expertise in theAC increases, thelikelihood of misappropriation of assets in publicly held companies decreases. H2b. As the percentage of memberswith non-accounting expertise in theAC increases, the likelihood of misappropriation of assets in publicly held companies decreases.

Beasley et al. (1999) classified directors into three categories:(1) inside director;(2) gray director; and(3) outside director.

They found that only 38 percent of companies experiencing fraud had ACs composedentirely of independent directors. The independent director is a member who has no disclosed ties with the company other than possible stock ownership.

Abbott et al. (2000) found that firms with ACs composed of independent directors are less likely to be sanctioned for fraudulent activities. Fraud in financial statements is more likely to occur where the AC is not independent (Uzan et al., 2004). Similarly, Mustafa and Meier (2006) examined the effectiveness of the AC in reducing themisappropriation of assets by employees. They found that as the proportion of independent directors on the AC increases, the likelihood of misappropriation of assets decreases. Chapple et al. (2009) also found that a higher degree of independence in the AC is associated with a lower likelihood of misappropriation.

These studies support the notion that the independence of AC members is more likely to be associated with the quality of financial statements. In addition to independence, the BRC (1999) and US Congress (2002) Section 407 require AC members to have accounting or related financial management expertise to be effective in monitoring the company. They must be financially literate or become financially literate within a reasonable time after their appointments. We predict in H3 that the independence of AC members with financial expertise will be associated with a lower likelihood of misappropriation of assets. The following alternative hypothesis will be tested:

H3. As the percentage of independent members with financial expertise in the AC increases, the likelihood of misappropriation of assets in publicly held companies decreases.

Sample selection procedureThe following tasks were performed to identify publicly held companies sufferingmisappropriation of assets by employees during the period from 1987 to 2000:(1) A search of LEXIS-NEXIS Research Software 7.1, Business/Finance News was conducted to identify articles that report misappropriation news. The search included the following key words: theft or embezzle! or larceny or misappropriate! or steal!. The search was conducted for the period between January 1, 1987 and December 31, 2001.(2) A review of news articles using “KWIC View” was conducted to decide whether the article reports a case of misappropriation of assets by employees or not. “KWIC View” displayed documents in the “key words in context” format, showing each of the search terms surrounded by a window of text. This format helped to determine quickly whether a document was applicable or not.(3) A review of the applicable news articles using “full view” was conducted in order to obtain further details about the case. In this task, the main objective, after checking that the news article was relevant to the study, was to obtain the company’s name.(4) A search of LEXIS-NEXIS, US Public Company Reports, US Company Reports, and US Private Company Reports was conducted using the name of the company identified in Task (3) to investigate whether the company was publicly held or not. In addition, this search identified the name of the parent company when the misappropriation company was a subsidiary.(5) A search of LEXIS-NEXIS, US News Combined and Business/Finance Newswas conducted using the name of the company identified in Task (4). The objective of this task was to retrieve details about the embezzlement such as the title(s) of the embezzler(s), the amount, the time, and the duration of the misappropriation. Cases of misappropriation greater than $50,000 wereincluded in the sample only if the misappropriation’s starting date was known and if the cases involved collusion with an outsider. Outsiders are people outside the company, such as family members, suppliers, and customers who collaborated with employees in the company to perpetrate the embezzlement.

The sample included 28 companies experiencing misappropriation of assets and 28 matched-control companies. Table I provides characteristics of misappropriation cases such as company size, the duration of the embezzlement case in months, the number of all embezzlers, the number of employee embezzlers, and the amount of the embezzlement.

On average, embezzlement cases continued for 32 months before being discovered or terminated. The longest embezzlement case lasted for ten years. The average number of embezzlers was around eight (i.e. 8.32) and the average number of employee embezzlers was around four (i.e. 4.04).

Companies are expected to adopt changes in their hiring practices of AC members in the post-SOX period to comply with the new regulations. Our sample period was restricted to a period between 1987 and 1998, so as to avoid the effects of SOX and the new regulations. Be´dard et al. (2004) suggested that future researchers employ such

time periods to investigate issues such as those examined in our paper, i.e. to examine firms that voluntarily adopted the best governance practices related to AC expertise before the release of the SOX recommendations for improving the effectiveness of corporate AC in 2002 (DeFond et al., 2005).

Variable measurements in the research modelsPrior studies used a firm’s proxy statement to determine the financial expertise of the firm’s AC members (Agrawal and Chadha, 2005; Abbott et al., 2004). Reviewing proxy statements is too restrictive and can be problematic, because in many cases proxy statements contain information about the work experience of AC members for recentyears only. Following the Dhaliwal et al. (2006) study, we considered additional sourcesof information to enhance the construct validity of the measures of financial expertise.We used “Google Search” to obtain additional information about AC expertise from other online sources such as companies’ websites and press releases.

Number of cases Minimum Maximum Mean SDCompany size ($millions) 28 80.41 237,706.00 31,654.72 52,419.74The duration of the embezzlement in months 28 1.00 120.00 31.86 28.04Number of all embezzlers 25 2.00 45.00 8.32 11.55Number of employee embezzlers 26 1.00 30.00 4.04 7.13The amount of embezzlement ($000) 28 100.00 73,000.00 13,950.18 21,350.95Table I.Characteristics of misappropriation cases

Following the Zhang et al. (2007) study, we classify a person as an ACCFE if his/her biography contained at least one of the following titles: CPA, certified management accountant (CMA), chief accounting officer, principle accounting officer, auditors. This is consistent with the originally proposed SEC (2002) rule for implementing Section 407 by coding members as ACCFE only if their biographical data indicate that they have the specific qualifications mentioned in the SEC definition. Then, we classify as NONACCEXP those AC members whose biographies contain at least one of the following titles: CEO, COO, and chairman of the board. Consistent with Zhang et al. (2007) and Carcello et al. (2006), we define the percentage of financial expert AC members as the percentage of (PERFINEXP) both categories[5] combined.

In order to capture the incremental impact of AC expertise on misappropriation of assets, we include ten control variables drawn from the literature. Prior researchexamined the number of AC meetings (Abbott et al., 2004; Agrawal and Chadha, 2005;DeFond et al., 2005; Zhang et al., 2007). We control for the diligence of the AC by including the number of audit meetings during the year prior to the occurrence of the misappropriation of assets (AUDITMEET).

SAS No. 99 lists the high turnover of members on the board of directors as a risk factor.

Beasley (1994, 1996) found that the average tenure of outside directors is significantly shorter in fraud companies than in no-fraud companies. Mustafa and Meier (2006) found that the average tenure of AC members of companies experiencing misappropriation of assets was significantly shorter than that of companies not experiencing misappropriation of assets. Members with shorter tenure may be unduly influenced bymanagerswho have recently nominated them, and thus may be less independent. Moreover, a member with shorter tenure has less experience with the company and, thus, may be less effective. Therefore, the average tenure in years of allmembers in theAC on the board of directors in the year prior to the occurrence of the misappropriation of assets (TENRAUDIT) is included as a control variable in the research models.

The board of directors plays a significant role in controlling management activities in publicly traded companies. The AC will not function effectively if the board of directors does not provide effective oversight (Beasley and Salterio, 2001). Our research models include the following four control variables related to the board of directors: the percentage of common shares owned by inside members of the board of directors in the year prior to the occurrence of the misappropriation of assets (OWNRBORD), the percentage of outside members of the board of directors in the year prior to the occurrence of the misappropriation of assets (OUTBORD), the total number of board members in the year prior to the occurrence of the misappropriation of assets (TOTABORD), and a dummy variable with a value of one when the chairman of theboard of directors is the CEO/president of a company in the year prior to the occurrence of the misappropriation, and a value of zero otherwise (CHAIR).

SAS No. 99 listed several risk factors related to the susceptibility of assets to misappropriation, including: large amounts of cash on hand or in process, large inventories, and easily convertible assets. The company asset composition has been applied in previous literature to predict fraud (Loebbecke et al., 1989; Bell et al., 1991;Beasley, 1996 and Green and Choi, 1997). Current assets such as cash and inventories are more vulnerable to theft than other assets (Strawser, 1997). Persons (1995) found that firms experiencing fraud differ significantly from those not experiencing fraud in certain aspects. Firms experiencing fraud are smaller in size, have lower asset turnover and a higher proportion of current assets, especially inventory and accounts receivable. Summers and Sweeney (1998) found that companies experiencing fraud have significantly more inventory relative to sales than those not experiencing fraud, but they found asset turnover to be significantly higher for companies experiencing fraud than those not experiencing fraud.

Therefore, the research model includes four variables of asset composition: asset growth, current asset ratio, asset turnover, and company size as control variables. Asset growth (GROWTH) is the compound growth rate of assets over the three-year period preceding the misappropriation of assets. Rapid growth in companies is expected to create an opportunity for employee theft. Changes in growing companies could lead to weaknesses in internal control. The company current asset ratio (LGCURRNT) is the natural logarithm of the ratio of current assets to total assets at the

year-end prior to the misappropriation of assets. This variable is consistent with SAS No. 99, which listed large amounts of cash on hand as a fraud risk factor. In addition,Strawser (1997) found cash to be the most vulnerable asset for theft. The companyasset turnover (LGASSTURN) is the natural logarithm of the ratio of net sales to totalassets at the year-end prior to the misappropriation. The measurement of this variable is similar to that in Persons (1995). The company size (LGSIZE) is the natural logarithm of the simple average of the total assets in the year prior to the misappropriation of assets. Finally, the last control variable in the research model is the number of years the company has been incorporated. The natural logarithm of the number of years a company has been incorporated (LGYEARS) was obtained using FIS online or the annual reports or the proxy statements of publicly held companies.

In order to test H1, we used research logit model (1) below to investigate the research question by examining whether the ACFE is related to the occurrence ofmisappropriation of assets in publicly held companies:

MISSAP ¼ b0 þb1PERFINEXP þb2INDPAUDIT þb3TENRAUDITþb4AUDITMEET þb5OWNRBORD þb6OUTBORDþb7TOTABORD þb8CHAIR þb9GROWTH þb10LGCURRNTþb11LGASSTURN þb12LGYEARS þb13LGSIZEð1Þ

In order to test H2a and H2b, we used research logit model (2) below to investigate theresearch question by examining whether combined AC accounting and non-accountingexpertise is related to the occurrence of misappropriation of assets in publicly heldcompanies:

MISSAP¼b0þb1PERACCEXPþb2PERNONACCEXPþb3INDPAUDITþb4TENRAUDITþb5AUDITMEETþb6OWNRBORDþb7OUTBORDþb8TOTABORDþb9CHAIRþb10GROWTHþb11LGCURRNTþb12LGASSTURNþb13LGYEARSþb14LGSIZEð2Þ

In order to test H3, we used research logit model (3) below to investigate the researchquestion by examining whether the percentage of independent AC members with financial expertise is related to the occurrence of misappropriation of assets in publiclyheld companies:

MISSAP ¼ b0 þb1PERINDPFIN þb2PERINDPNONFIN þb3TENRAUDITþb4AUDITMEET þb5OWNRBORD þb6OUTBORDþb7TOTABORD þb8CHAIR þb9GROWTH þb10LGCURRNTþb11LGASSTURN þb12LGYEARS þb12LGSIZEð3Þ

Descriptive statisticsIn order to test the research hypothesis, a matched control sample was obtained from

COMPUSTAT.The control sample and themisappropriation companieswerematched on three variables: size (i.e. average total assets), industry, and time period. Table II provides descriptive statistics of the independent and control variables for the control companies and for the companies experiencing misappropriation of assets. The descriptive statistics were consistent with the predicted direction of H1 and H3. The control companies on average had more than 76 percent of their AC members with financial expertise (PERFINEXP) compared to an average of almost 65 percent for the companies experiencing misappropriation of assets in the year prior to the occurrence of misappropriation of assets. The average percentage of independent members in the AC (INDPAUDIT) of the control companies was 85 percent compared to less than 79 percent for companies experiencing misappropriation of assets. The t-test for the difference between the means of the control companies and companies experiencingmisappropriation of assets was significantly different for the percentage of independentmembers in the AC with financial expertise in the year prior to the occurrence of misappropriation of assets (PERINDPFIN). That is, in the control companies the percent of ACmemberswhowere independent withfinancial expertisewas 65, compared to less than 50 percent in the companies experiencing misappropriation of assets.

The descriptive statistics in Table II show that the average percentage of members inthe AC with accounting expertise (PERACCEXP) for both the control companies andcompanies experiencingmisappropriation of assetswas very close and less than 7 percent. Therefore, in our sample, the definition of financial expertise is driven by non-accounting expertise, where the average percentage of members in the AC with non-accounting expertise (PERNONACCEXP) was almost 70 percent for the control companies compared to almost 59 percent for the companies experiencing misappropriation of assets.

Empirical resultsThe results of model (1) in Table III indicate that there is a significant relationship between the percentage of AC members with financial expertise and the occurrence ofmisappropriation of assets in our sample. The coefficient on PERFINEXP is 23.167 (Wald ¼ 2.983). Therefore, H1 is supported. In model (2), we further investigated theeffects of financial expertise by examining H2a and H2b. The results indicate thatthe percentage of AC members with accounting expertise is not significantly relatedto the occurrence of misappropriation of assets. The coefficient on PERACCEXP is20.032 (Wald ¼ 0.965). Therefore, although H2a is not supported, the coefficient sign is negative, as predicted. Persons (2005) provided two possible explanations for the insignificant results in her study of accounting expertise: First, committees spend a relatively short time reviewing a company’s financial statements and control; therefore, it may be impossible that even members with expertise can discover accounting irregularities. Second, the presence of a member with expertise can lead other members to become less vigilant.

Control companies Misappropriation companiesVariables Minimum Maximum Mean Median SD Minimum Maximum Mean Median SDPERFINEXP 33.00 100.00 76.32 80.00 0.22 20.00 100.00 65.20 66.67 0.28

PERACCEXP 0.00 50.00 6.99 0.00 13.17 0.00 100.00 6.55 0.00 19.95PERNONACCEXP 33.33 100.00 69.32 68.33 24.00 0.00 100.00 58.66 55.00 29.98PERINDPFIN * 33.33 100.00 65.04 67.00 19.00 0.00 100.00 49.13 50.00 26.61PERINDPNONFIN 0.00 66.67 19.93 20.00 20.60 0.00 75.00 29.68 26.67 25.74INDPAUDIT 40.00 100.00 85.03 100.00 18.78 25.00 100.00 78.81 87.50 23.77TENRAUDIT * * 0.92 19.86 9.93 9.50 4.97 1.00 18.33 7.69 7.65 4.30AUDITMEET 1.00 9.00 3.36 3.00 1.79 1.00 10.00 4.11 4.00 2.08OWNRBORD 0.03 80.89 5.82 0.82 16.10 0.01 31.89 3.69 0.83 7.82OUTBORD 41.67 92.86 77.67 80.74 13.14 50.00 92.86 77.57 81.53 12.27TOTABORD 7.00 28.00 12.75 12.00 4.96 6.00 26.00 13.32 13.50 4.77GROWTH 22.49 44.64 11.23 7.54 11.66 211.91 62.87 9.92 7.83 15.48LGCURRNT 2.36 4.59 3.52 3.60 0.66 2.27 4.40 3.54 3.69 0.65LGASSTURN 22.58 0.66 20.88 20.49 1.11 22.53 1.67 20.68 20.34 1.22LGYEARS 0.00 4.71 3.30 3.53 1.17 0.00 4.49 3.22 3.31 0.97LGSIZE 10.91 19.11 15.34 15.52 1.97 11.29 19.29 15.90 16.04 2.00

Notes: Equality of means t-test is significant at the *0.01 level (one-tailed); * *0.05 level (one-tailed); PERFINEXP, percentage of members in the AC with financial expertise in the year prior to the occurrence of the misappropriation of assets; PERACCEXP, percentage of members in the AC with accounting expertise in the year prior to the occurrence of the misappropriation of assets; PERNONACCEXP, percentage of members in the AC with non-accounting expertise in the year prior to the occurrence of the misappropriation of assets; PERINDPFIN, percentage of independent members in the AC with financial expertise in the year prior to the occurrence of the misappropriation of assets; PERINDPNONFIN, percentage of independent members in the AC with non-financial expertise in the year prior to the occurrence of the misappropriation of assets; INDPAUDIT, percentage of independent members in the AC in the year prior to the occurrence of the misappropriation of assets; TENRAUDIT, average tenure in years of all members in the AC on the board of directors in the year prior to the occurrence of the misappropriation of assets; AUDITMEET, number of audit meetings during the year prior to the occurrence of the misappropriation of assets; OWNRBORD, percentage of common shares owned by inside members of the board of directors in the year prior to the occurrence of the misappropriation of assets; OUTBORD, percentage of outside members on the board of directors in the year prior to the occurrence of the misappropriation of assets; TOTABORD, total number of board members in the year prior to the occurrence of the misappropriation of assets; GROWTH, the compound growth rate of assets over three years prior to the occurrence of the misappropriation of assets to the misappropriation; LGCURRNT, the natural logarithm of the current asset ratio in the year prior to the occurrence of the misappropriation of assets; LGASSTURN, the natural logarithm of the asset turnover in the year prior to the occurrence of the misappropriation of assets; LGYEARS, the natural logarithm of number of years a company has been incorporated prior to the occurrence of the misappropriation of assets; LGSIZE, the natural logarithm of the simple average of the total assets in the year prior to the occurrence of the misappropriation of assets

Table II.Descriptive statistics of the independent and control variables: control and misappropriation companies

The percentage of AC members with non-accounting expertise is negatively and significantly related to the occurrence of misappropriation of assets. The coefficient onPERNONACCEXP is 20.032 (Wald ¼ 2.983). Therefore, H2b is supported. Using thebroader definition of financial expertise is more significant than using the narrowerdefinition of accounting expertise. Previous studies generally find that accounting/financial expertise is positively associated with the quality of financialreporting (DeFond et al., 2005; Carcello et al., 2006; Dhaliwal et al., 2006; Be´dard et al., 2007), a finding which is consistent with ours.

In model (3), we test H3 to examine the interaction between financial expertise andindependence of the AC members. The percentage of members who are independentmembers and have financial expertise is negatively and significantly related to theoccurrence of misappropriation of assets. The coefficient on PERINDPFIN is 29.188 (Wald ¼ 8.298). Therefore, H3 is supported. However, it is interesting to note that theModel 1 Model 2 Model 3Variables Coefficient (Wald) Coefficient (Wald) Coefficient (Wald)Constant 8.553 (1.849) 8.551 (1.807) 8.551 (1.807)PERFINEXP 23.167 * (2.983)PERACCEXP 20.032 (0.965)PERNONACCEXP 20.032 * (2.983)INDPAUDIT 20.071 * * (6.941) 20.071 * * (6.934)PERINDPFIN 29.188 * * (8.298)PERINDPNONFIN 20.038 (2.036)TENRAUDIT 20.352 * * (7.980) 20.352 * * (7.663) 20.420 * * (8.367)AUDITMEET 0.335 (1.846) 0.335 (1.846) 0.377 (1.880)OWNRBORD 20.012 (0.123) 20.012 (0.105) 20.013 (0.133)OUTBORD 20.022 (0.367) 20.022 (0.345) 20.023 (0.397)TOTABORD 0.017 (0.018) 0.017 (0.018) 0.051 (0.175)CHAIR 2.671 * * * (4.233) 2.670 * * * (4.144) 2.744 * * * (4.169)GROWTH 20.009 (0.102) 20.009 (0.087) 20.006 (0.051)LGCURRNT 20.002 0.000 20.002 0.000 20.026 0.001LGASSTURN 0.378 (0.685) 0.379 (0.669) 0.318 (0.488)LGYEARS 20.102 (0.045) 20.102 (0.045) 0.025 (0.003)LGSIZE 0.097 (0.109) 0.097 (0.108) 20.015 (0.002)Model R 2 0.448 0.448 0.505Model x 2 22.915 22.915 26.628Model significance 0.043 0.062 0.014Classification accuracy (%) 73.20 73.20 75.00Notes: For definition of variables (Table II); significant at the *0.10 level; * *0.01 level; * * *0.05 level; CHAIR, a dummy variable with a value of one when the chairman of the

board of directors of the misappropriation, a value of zero otherwise is the CEO/president of a company in the year prior to the occurrence

Table III.ACFE and misappropriation of assets logit models percentage of AC members who are independent and who have non-financial expertise is not significantly related to the occurrence of misappropriation. The results support the notion that an independent AC member is only effective in reducing the occurrence of misappropriation of assets in publicly held companies if he/she is also a financial expert.

Our results support the hypothesis that the financial expertise and the independenceof AC members improve their effectiveness in reducing the likelihood of misappropriation of assets in publicly held companies in the USA: that is to say, thehigher the percentage of financial expert members and the higher the percentage ofindependent members in the AC, then, the less likely the occurrence of misappropriation of assets. Further investigation of AC independence and financial expertise indicates that the percentage of independent AC members with financial expertise is negatively and significantly related to the occurrence of misappropriation of assets, while the percentage of independent AC members with no financial expertise is not significantly related to the occurrence of misappropriation of assets. The results support the notion that independent AC members are effective in reducing the occurrence of misappropriation of assets only if they are also financial experts.

ConclusionsWhile prior research implied that financial expertise would have a favorable impact onthe quality of financial reporting, this paper extends the literature by investigating whatinfluence the effectiveness of the AC has on misappropriation of assets. Our paper is the first to examine the association between the effectiveness of the AC and the incidence of misappropriation of assets by testing the interaction between financial expertise and the independence of AC members. We found that the higher the percentage of financial expert members and the higher the percentage of independent members in the AC, the lower the likelihood of misappropriation of assets. Using the broader definition of financial expertise is more significant than using the narrower definition. Further investigation of AC independence and financial expertise indicates that the percentage of independent AC members with financial expertise is negatively and significantly related to the occurrence of misappropriation of assets, whereas the percentage of independent AC members with non-financial expertise is not significantly related to the occurrence of misappropriation of assets.

Our results support the notion that the financial expertise and the independence ofAC members improve their effectiveness in reducing the likelihood of misappropriation ofassets in publicly held companies in the USA. An independent AC member is only effective in reducing occurrence of misappropriation of assets if he/she is also financial expert. The study included only cases of misappropriation of assets involving collusionwith an outsider that have been discovered and reported in the news (i.e. newsworthy cases). Despite the relatively small sample size of 56 companies, the results draw

attention to how important the presence of financial expert members on the AC is to its effectiveness in preventing misappropriation of assets.

Our study contributes to the debate on the appropriate definition of a financial expertand the efficacy of the SOX recommendation concerning the financial expertise of theAC members with respect to the incidence of misappropriation of assets in publicly held companies in the USA (DeFond et al., 2005; Carcello et al., 2006; Dhaliwal et al., 2006; Krishnan and Visvanathan, 2008). We extend the ACFE literature by examining two specific types of financial expertise and the occurrence of misappropriation of assets: ACCFE and NONACCEXP. By including both accounting and non-accounting financial expertise in the same model, this study is the first to test the association between the two types of financial expertise and the misappropriation of assets. This may have implications for ACs and board chairs who are considering measures to enhance the effectiveness of the AC by hiring qualified members. From a practical perspective, the paper may provide feedback to the regulators (SEC, 2003) on the need for a better definition of AC expertise and the composition of AC members.

Future testing to examine the interaction between tenure, independence, and expertise using a larger sample size to support the current findings is needed before definite conclusions can be drawn. Future research may also investigate the role of the financial expertise of AC members and the smooth implementation of the International Financial Reporting Standards (IFRS) by companies in the USA.

Notes1. The participants in the study of Association of Certified Fraud Examiners and Peltier-Rivest (2007) are Canadian members of the Associations of Certified Fraud Examiners. They are professionals with a median 15 years of experience in the fraud examination field. They estimate that the typical Canadian organization loses 5 percent of its annual sales to fraud every year. This is a large number when considering the highly competitive nature of the Canadian economy.2. The AC member who has financial expertise should have: an understanding of GAAP and financial statements; experience in; the preparation or auditing of financial statements of generally comparable issuers; and the application of such principles in connection with an accounting for estimates, accruals, and reserves; experience with internal accounting controls; and an understanding of the AC functions.3. The remaining members are non-accounting ACFEs. They consider non-accounting ACFE to be those who have held non-financial positions as senior business executives.4. ACFE includes both accounting and non-accounting financial expertise.5. Both categories refer to accounting and non-accounting expertise.ReferencesAbbott, L.J., Park, Y. and Parker, S. (2000), “The effects of audit committee activity andindependence on corporate fraud”, Managerial Finance, Vol. 26, pp. 55-67.Abbott, L.J., Parker, S. and Peters, G. (2004), “Audit committee characteristics and restatements”,Auditing: A Journal of Practice & Theory, Vol. 23 No. 1, pp. 69-87.

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Mergent Online (2008), Mergent, New York, NY, available at: www.mergentonline.comOlson, J. (1999), “How to really make audit committees more effective”, Business Lawyer, Vol. 54No. 3, pp. 1097-111.Stanley, J.D. and DeZoort, F.T. (2007), “Audit firm tenure and financial restatements: an analysisof industry specialization and fee effects”, Journal of Accounting & Public Policy, Vol. 26No. 2, pp. 131-59.Corresponding authorSameer T. Mustafa can be contacted at: smustafa@ud.ac.aeAudit committeefinancialexpertise225To purchase reprints of this article please e-mail: reprints@emeraldinsight.comOr visit our web site for further details: www.emeraldinsight.com/reprints

Komite Audit keuangan keahlian dan penyalahgunaan aktiva Sameer T. Mustafa Universitas Dubai, Dubai, Uni Emirat Arab, dan Nourhene Ben Youssef E 'cole des Sciences de Gestion, Universite' du Que'bec A `Montre'al, Montre'al, Kanada

Abstrak Tujuan - Tujuan makalah ini adalah untuk mengetahui hubungan antara keahlian keuangan komite audit (AC) dan kejadian penyalahgunaan aset di perusahaan publik di Amerika Serikat. Desain / metodologi / pendekatan - Sampel terdiri dari 28 perusahaan publik di Amerika Serikat mengalami penyalahgunaan aset 1987-1998, serta 28 perusahaan kontrol disesuaikan berdasarkan ukuran, industri, dan jangka waktu. Efektivitas keahlian keuangan AC dalam mengurangi terjadinya penyalahgunaan aset diperiksa oleh model logistik menggunakan dua jenis khusus keahlian keuangan: akuntansi dan non-akuntansi keahlian keuangan. Temuan - Hasil mendukung gagasan bahwa anggota AC independen hanya efektif dalam mengurangi terjadinya penyalahgunaan aset di perusahaan publik jika ia juga seorang ahli keuangan. keterbatasan Penelitian / implikasi - Makalah ini memberikan kontribusi terhadap perdebatan mengenai definisi yang tepat dari "ahli keuangan" dan manfaat dari keahlian keuangan anggota AC - seperti yang didefinisikan oleh undang-undang Sarbanes-Oxley - dalam mengurangi kejadian penyalahgunaan aset di publik diselenggarakan perusahaan di Amerika Serikat. Makalah ini mencakup hanya 28 kasus

penyalahgunaan aset oleh karyawan yang melibatkan kolusi dengan orang luar, seperti yang ditemukan dan dilaporkan dalam berita (kasus nilai berita yaitu). Keaslian / nilai - Meskipun beberapa studi sebelumnya telah menarik perhatian pada hubungan antara kemerdekaan AC dan penyalahgunaan aset, tidak ada bukti empiris untuk mendukung atau untuk menolak hipotesis bahwa keahlian keuangan telah berdampak pada terjadinya penyalahgunaan aset. Tulisan ini adalah yang pertama untuk menguji hubungan antara efektivitas AC dan terjadinya penyalahgunaan aset oleh menguji interaksi antara AC keahlian keuangan anggota dan kemandirian mereka.

Pengantar Menanggapi meningkatnya kasus penipuan, Kongres AS (2002) dikembangkan rekomendasi yang bertujuan untuk meningkatkan efektivitas komite audit (AC) di perusahaan publik di Amerika Serikat. Selain independensi anggota AC, Pasal 407 mengharuskan perusahaan untuk mengungkapkan apakah atau tidak theAC termasuk ahli keuangan (dan, jika tidak, mengapa tidak). Tujuan kertas kita adalah untuk mengetahui hubungan antara keahlian keuangan theACand insiden penyalahgunaan aset di publik diselenggarakan di perusahaan-perusahaan di Amerika Serikat. Penelitian ini adalah yang pertama untuk menguji hubungan antara efektivitas AC dan terjadinya penyalahgunaan aset oleh menguji interaksi antara AC keahlian keuangan anggota dan kemandirian mereka.

Penelitian kami berhubungan erat dengan studi saat ini oleh Mustafa dan Meier (2006) dan CHAPPLE et al. (2009) yang telah meneliti hubungan antara kejadian penyalahgunaan aset dan efektivitas AC. Di Amerika Serikat, Mustafa dan Meier (2006) menemukan bahwa semakin besar efektivitas AC, semakin tinggi persentase anggota independen dan semakin lama jangka rata-rata anggota AC, maka, semakin rendah kejadian penyalahgunaan aset. Di Australia dan Selandia Baru, CHAPPLE et al. (2009) juga menemukan bahwa proporsi direktur independen di AC berbanding terbalik dengan kejadian penyalahgunaan. Sementara kedua studi menarik perhatian kemerdekaan anggota AC, tidak ada bukti empiris langsung untuk mendukung atau untuk menyangkal klaim bahwa keahlian keuangan telah berdampak pada penyalahgunaan aset.

Kami memperpanjang komite audit keahlian keuangan (ACFE) sastra dengan memeriksa dua jenis khusus keahlian keuangan: akuntansi (ACCFE) dan para ahli non-akuntansi keuangan (NONACCEXP). Kami fokus pada penyalahgunaan aset karena beberapa alasan. kasus penyalahgunaan aset lebih umum dari kecurangan pelaporan keuangan, akuntansi selama hampir 80 persen dari kasus penipuan yang dilaporkan (Wells, 2000; Peterson dan Gibson, 2002). Selain itu, meskipun fakta bahwa Pernyataan Standar Audit (SAS) Nomor 99 menggambarkan penyalahgunaan aset penipuan sebagai "[. . ] Sering. Dilakukan oleh karyawan dalam jumlah yang relatif kecil dan tidak material ", bukti menunjukkan secara ekonomi signifikan. Diperkirakan bahwa 6 persen dari pendapatan perusahaan AS pada tahun 2002 telah hilang melalui penipuan yang dilakukan oleh karyawan (Holtfreter, 2004). Di Kanada, responden [1] untuk sebuah survei pada tahun 2004 diperkirakan 90 persen dari semua kasus penipuan kerja terlibat misappropriations aset dengan kerugian rata-rata sebesar CAD $ 200.000 (Asosiasi Penguji Certified Penipuan dan Peltier-Rivest, 2007). Perkiraan penyalahgunaan aset yang mengkhawatirkan.

Asosiasi Penguji Certified Fraud (2002) memperkirakan bahwa biaya penipuan US organisasi lebih dari $ 600 miliar per tahun. (2000) survei Ernst and Young menemukan bahwa lebih dari dua-pertiga responden telah menderita dari penipuan dalam 12 bulan sebelumnya, dan hampir satu dari sepuluh telah menderita lebih dari 50 penipuan. Jelas, penyalahgunaan aset merupakan masalah penting bagi banyak organisasi.

Makalah ini dibagi menjadi enam bagian di mana kita: (1) mendefinisikan ACFE menurut SOX; (2) membahas literatur tentang ACFE; (3) mengembangkan hipotesis penelitian kami; (4) memberikan prosedur pemilihan sampel dan menjelaskan pengukuran variabel dalam model penelitian; (5) menyajikan statistik deskriptif dan hasil empiris, dan akhirnya (6) negara kita kesimpulan.

Definisi keahlian keuangan Kongres AS (2002) memperkenalkan persyaratan luas untuk mengatasi kekurangan-kekurangan yang dirasakan berhubungan dengan komposisi AC. Bagian 407 dari SOX membutuhkan Securities and Exchange Commission (SEC) untuk mengadopsi aturan yang mewajibkan bahwa AC perusahaan publik harus mengungkapkan apakah ada ahli keuangan di AC atau tidak (dan, jika tidak, mengapa tidak). Persyaratan ini mencerminkan kepercayaan kongres bahwa "[. . ] Efektivitas AC sebagian bergantung pada pengetahuan anggotanya dan pengalaman dalam audit dan masalah keuangan "(US Senat, 2002, hal 32).. Namun, definisi keahlian finansial yang sangat sempit dan kontroversial (Zhang et al, 2007;. DeFond et al, 2005;. SEC, 2003). Definisi mengklasifikasikan individu sebagai ahli keuangan jika mereka mendapatkan pendidikan dan pengalaman di bidang akuntansi dan audit [2]. Memang, SEC menerima lebih dari 200 surat komentar, banyak yang mengklaim bahwa definisi ini terlalu ketat dan ada kurangnya jumlah kandidat yang memenuhi syarat mampu dan mau untuk mengisi posisi-posisi. Sebagai tanggapan, SEC (2003) mengadopsi definisi yang lebih liberal keahlian keuangan dalam aturan akhir, di mana ahli keuangan didefinisikan sebagai orang dengan pengalaman di bidang akuntansi, pengawasan profesional keuangan dan mengawasi kinerja perusahaan (misalnya, kepala pejabat eksekutif (CEO) dan kursi papan).

Setelah Zhang et al. (2007), kita mengklasifikasikan ACFE menjadi dua kelompok: ACCFE dan NONACCEXP.ACCFE adalah directorswho sebagian besar adalah berpengalaman dalam akuntansi sebagai Pembukuan publik bersertifikat (BPA), auditor, petugas akuntansi utama, petugas akuntansi kepala, atau posisi akuntansi lainnya besar. NONACCEXP adalah direktur yang umumnya dialami sebagai CEO, presiden, atau kursi dewan yang di buat untuk keuntungan perusahaan, atau sebagai mengelola, mitra direksi atau pelaku dalam pembiayaan usaha, perbankan investasi, atau manajemen uang.

Review literatur tentang ACFE Terbatas penelitian eksperimental menunjukkan bahwa dampak keahlian anggota AC keuangan '

penilaian dan pelaporan hasil yang berhubungan dengan keuangan (DeZoort dan Salterio, 2001; McDaniel et al, 2002.). Sebagai contoh, McDaniel et al. (2002) menemukan bahwa para ahli cenderung lebih berfokus pada berulang, isu-isu yang kurang menonjol, sedangkan aksarawan keuangan lebih terfokus pada non-berulang, isu yang menonjol. Hasil dari penelitian ini menunjukkan bahwa setiap kelompok dapat membawa perspektif yang berbeda untuk pertemuan AC dan dengan demikian meningkatkan kualitas pelaporan keuangan. Namun, seperti McDaniel et al. (2002) menyarankan, peneliti masa depan bisa meneliti bagaimana berbagai jenis ahli keuangan mengevaluasi berbeda kualitas pelaporan keuangan.

Dengan menggunakan definisi yang berbeda keahlian keuangan, sejumlah studi arsip menguji asosiasi ACFE dan kualitas pelaporan keuangan. Studi ini mengukur kualitas pelaporan keuangan sebagai manajemen laba (Xie et al, 2003;. Be'dard et al, 2004.) Dan penyajian kembali (Abbott et al, 2004;. Agrawal dan Chadha, 2005). Xie et al. (2003) meneliti hubungan antara akrual discretionary sebagai proxy untuk manajemen laba, dan latar belakang anggota AC. Mereka menemukan bahwa proporsi anggota AC dengan latar belakang perbankan korporasi atau investasi berhubungan negatif dengan tingkat manajemen laba. Para peneliti menyimpulkan bahwa AC aktif dan berorientasi finansial dapat mempengaruhi tingkat manajemen laba.

Abbott et al. (2004) menguji dampak ACFE terhadap penyajian kembali keuangan. Mereka menggunakan definisi yang lebih luas keahlian keuangan dan termasuk bankir CPA, investasi, usaha kapitalis, kepala keuangan (CFO), controller, atau seseorang yang telah menduduki posisi manajemen senior dengan tanggung jawab keuangan. Mereka menemukan bahwa perusahaan dengan para ahli keuangan di AC cenderung mengalami penyajian kembali pelaporan keuangan. Menggunakan definisi sempit dari Abbott et al. (2004), Be'dard et al. (2004) meneliti khasiat Blue Ribbon Committee (BRC, 1999) rekomendasi tentang pengaruh keahlian pada manajemen laba. Mereka menemukan bahwa kehadiran setidaknya seorang ahli keuangan berhubungan negatif dengan manajemen laba agresif. Mereka menemukan, juga, bahwa perusahaan dengan keahlian keuangan kecil kemungkinannya untuk mendefinisikan "ahli keuangan" istilah sempit. Dalam studi mereka, seorang ahli keuangan didefinisikan sebagai CPA, seorang analis keuangan bersertifikat (CFA), atau seseorang dengan "pengalaman di bidang keuangan atau akuntansi".

Seperti Abbott et al. (2004), Agrawal dan Chadha (2005) menemukan bahwa kemungkinan penyajian kembali laporan keuangan lebih rendah saat AC memiliki pakar-pakar keuangan. Sekali lagi, definisi keahlian keuangan bervariasi. Agrawal dan Chadha (2005) didefinisikan keahlian keuangan langsung atau latar belakang akuntansi keuangan (CPA dan CFA), dan pengalaman dalam pengelolaan keuangan perusahaan (CEO, wakil presiden keuangan (VPF), bendahara, dan controller). Namun, seperti Braswell dan Mauldin (2004) menunjukkan, yang Agrawal dan Chadha (2005) hasil lebih kuat daripada Abbott et al. (2004), yang dapat sinyal bahwa hasil kedua, dengan menggunakan definisi yang lebih luas keahlian keuangan, didorong oleh keahlian akuntansi yang belum diuji secara terpisah.

Studi ini menyarankan bahwa ahli keuangan di AC dapat meningkatkan kualitas pelaporan keuangan. Akuntansi perusahaan (PricewaterhouseCoopers, 1999), dan regulator (SEC, 2003) berpendapat bahwa

keahlian keuangan sangat penting untuk memastikan bahwa AC memenuhi tanggung jawab utama mereka mengawasi proses pelaporan keuangan dan meningkatkan kualitas pelaporan keuangan. Namun, studi tersebut digunakan definisi yang berbeda keahlian, dan tidak membandingkan hasil di definisi (Be'dard dkk, 2007.). Selain itu, penelitian ini tidak meneliti berbagai jenis ahli keuangan (akuntansi vs non-akuntansi ahli) untuk mengevaluasi kualitas pelaporan keuangan. Dengan kata lain, adalah mungkin bahwa hasil studi ini didorong oleh hanya satu jenis keahlian.

Penelitian terbaru diteliti lebih dalam berbagai konsepsi keahlian AC (DeFond et al, 2005; Dhaliwal et al, 2006;.. Carcello et al, 2006;. Zhang et al, 2007;. Krishnan dan Visvanathan, 2008). Pendekatan baru ini didorong oleh perdebatan tentang pertanyaan ini, terutama setelah membandingkan definisi SEC awal dan revisi keahlian keuangan sehubungan dengan keanggotaan AC. Sebagian besar dari studi ini ACFE diklasifikasikan ke dalam dua kategori: keahlian akuntansi keuangan dan non-akuntansi keahlian keuangan. Studi menunjukkan bahwa berbagai tingkat keahlian yang berhubungan dengan reaksi pasar terhadap janji AC (Dechow et al, 1996.), Kualitas akrual (Dhaliwal et al, 2006;.. Carcello et al, 2006), akuntansi konservatif (Krishnan dan Visvanathan, 2008 ), dan kelemahan pengendalian internal (Zhang et al, 2007)..

Menggunakan data pra-SOX, Dhaliwal et al. (2006) mempelajari hubungan kualitas akrual dengan tiga kategori keahlian keuangan: akuntansi, pengawasan dan "pembiayaan" keahlian (analis keuangan yaitu). Mereka ditugaskan akuntansi keahlian kepada anggota AC yang saat ini memiliki, atau memiliki, pengalaman bekerja sebagai CPA, CFO, pengendali keuangan, atau posisi akuntansi lainnya besar. Mereka ditugaskan keahlian keuangan kepada anggota AC yang saat ini memiliki, atau memiliki, pengalaman kerja sebagai bankir investasi, analis keuangan, atau peran manajemen keuangan lainnya. Mereka ditugaskan keahlian pengawasan kepada anggota AC yang memiliki, atau memiliki, pengalaman bekerja sebagai CEO atau presiden perusahaan. Para penulis menemukan bahwa keahlian akuntansi yang hanya terkait dengan kualitas yang lebih tinggi dari akrual. Temuan ini mendukung gagasan bahwa definisi saat keahlian keuangan terlalu luas. Makalah ini sesuai dengan penelitian empiris et al DeFond. (2005) yang menyimpulkan bahwa akuntan akan menyumbangkan keahlian akuntansi.

DeFond et al. (2005) mengeksplorasi masalah komposisi AC selama sepuluh tahun sebelumnya perjalanan SOX. Penulis memeriksa tiga hari kumulatif abnormal return (CAR) di sekitar pengumuman dari 702 yang baru diangkat di luar direksi ditugaskan untuk AC. Mereka digolongkan anggota AC sebagai ACCFE (sempit didefinisikan sebagai dalam proposal SEC asli), NONACCEXP (berdasarkan kesimpulan dari versi final SOX) dan para ahli non-keuangan lainnya (berdasarkan kurangnya keahlian keuangan di bawah definisi SOX). Mereka menemukan reaksi pasar menguntungkan pengangkatan direksi yang ahli akuntansi, terutama ketika atribut lainnya pemerintahan yang baik ada. Namun, mereka tidak menemukan reaksi seperti itu untuk NONACCEXP atau orang lain tidak dalam kategori tersebut (yang akan termasuk para ahli non-keuangan). Para penulis menyarankan bahwa pengangkatan seorang ahli akuntansi yang diharapkan dapat meningkatkan tata kelola perusahaan melalui pemantauan peningkatan. Namun, seperti Engel (, 2005 hal 203) disebutkan, "adalah reaksi pasar suatu harapan peningkatan nilai, bukan ukuran langsung perbaikan aktual atau akhir yang berhubungan dengan janji." Dalam terang ini, seseorang tidak bisa melompat ke salah satu priori kesimpulan bahwa penunjukan ahli

keuangan untuk AC selalu meningkatkan tata kelola perusahaan.

Antara tahun 2000 dan 2002, Krishnan dan Visvanathan (2008) meneliti apakah ACCFE meningkatkan kualitas pelaporan keuangan (diukur oleh konservatisme akuntansi) lebih dari NONACCEXP. Setelah DeFond et al. (2005), penulis diukur keahlian dalam tiga cara:

(1) ACCFE adalah direktur dengan pengalaman sebagai auditor CPA,, pokok. atau kepala keuangan, controller, atau prinsip akuntansi atau pejabat kepala; (2) NONACCEXP adalah direktur dengan pengalaman sebagai CEO atau presiden-profit untuk korporasi, dan (3) ahli non-keuangan adalah direktur yang bukan akuntansi maupun NONACCEXP.

Mereka mendokumentasikan fakta bahwa perusahaan dengan para ahli (sempit didefinisikan) pada AC mereka lebih konservatif dalam akuntansi mereka daripada perusahaan tanpa (atau dengan proporsi yang lebih rendah dari) para ahli pada AC mereka. Temuan ini konsisten dengan penjelasan pemantauan bahwa pengangkatan ACCFE meningkatkan pengawasan komite. Memodifikasi definisi yang digunakan oleh DeFond et al. (2005), Zhang et al. (2007) menunjukkan bahwa efektivitas AC, ditandai sebagai memiliki keahlian lebih keuangan atau, lebih spesifik, yang memiliki keahlian akuntansi lebih keuangan dan non-akuntansi keahlian keuangan, merupakan faktor penentu penting kelemahan pengendalian internal.

Menggunakan pasca-SOX data, Carcello et al. (2006) meneliti efek ACFE terhadap manajemen laba yang agresif, di mana mereka mendefinisikan manajemen agresif laba akrual abnormal. Mereka mendefinisikan ACFE akuntansi sebagai orang dengan pengalaman saat ini atau sebelumnya sebagai CPA, seorang CFO, kontroler, bendahara, atau wakil presiden keuangan. Semua ACFEs diungkapkan lainnya dianggap non-akuntansi ACFEs [3]. Mereka dibagi dalam kelompok-kelompok NONACCEXP: eksekutif bisnis senior (misalnya CEO, presiden, ketua dewan, Chief Operating Officer (COO), wakil presiden) dan non-akuntansi ahli (investasi bankir, kapitalis ventura, konsultan, investor swasta, pengacara, dan akademisi). Mereka menemukan manajemen yang agresif mengurangi laba antara perusahaan yang memiliki para ahli yang ditunjuk dengan pengalaman akuntansi. Di antara mereka dengan pengalaman non-akuntansi, mereka tidak menemukan hubungan untuk para ahli yang ditunjuk memiliki pengalaman pengawasan (pengalaman bisnis senior), tetapi menemukan hubungan untuk individu yang ditunjuk dengan pengalaman selain pengawasan.

Secara ringkas, studi-studi (DeFond et al, 2005;. Carcello et al, 2006;.. Dhaliwal et al, 2006; Krishnan dan Visvanathan, 2008), dengan pengecualian Zhang et al. (2007), secara tegas mendukung definisi asli mempersempit SEC keahlian yang bertentangan dengan definisi yang lebih luas itu kemudian diadopsi di bawah tekanan. resep adalah untuk mendukung SOX's dan definisi pertama mempersempit SEC. Setelah semua, sebagai Beresford (2005) menyatakan, CEO dan ahli lainnya (presiden, wakil presiden (VP), dll) jarang memiliki pengetahuan tentang prinsip-prinsip

akuntansi yang berlaku umum (GAAP) atau ketentuan dan peraturan SEC.

Pengembangan Hipotesis Untuk yang terbaik dari pengetahuan kita, studi oleh Mustafa dan Meier (2006) dan CHAPPLE et al. (2009) adalah satu-satunya studi yang meneliti bagaimana efektivitas AC dikaitkan dengan penyalahgunaan aset. Namun, penelitian ini dibatasi untuk mengukur efektivitas AC sesuai dengan independensi anggota AC. Orang (2005) menguji hubungan antara kemungkinan penipuan laporan keuangan dan ketentuan tata kelola perusahaan tertentu dari SOX dan aturan bursa saham New York dan asosiasi nasional dealer efek kutipan otomatis pasar. Dia mendefinisikan direksi dengan keahlian akuntansi yang sama dengan pengalaman CPA, CFA, atau dalam pengelolaan keuangan perusahaan. Penulis menyediakan dua penjelasan yang mungkin untuk hasil yang tidak signifikan di ruang kerjanya keahlian keuangan. Pertama, komite menghabiskan waktu yang relatif singkat mereview laporan keuangan perusahaan dan kontrol, karena itu, mungkin mustahil bahwa bahkan anggota dengan keahlian dapat menemukan penyimpangan akuntansi. Kedua, kehadiran anggota dengan keahlian dapat mengakibatkan anggota lainnya menjadi kurang waspada.

Dalam melaksanakan Pasal 407, SEC (2003) didefinisikan "komite audit ahli keuangan" sebagai seorang individu dengan pemahaman tentang pelaporan keuangan dan pengendalian internal terkait, tapi tidak harus dengan pengalaman langsung dalam fungsi tersebut. Masalah yang timbul adalah apakah AC anggota dengan pengalaman langsung kurang sama-sama efektif dalam mengawasi proses pelaporan keuangan, sehingga mengurangi kemungkinan penyalahgunaan (Cohen et al, 2004.).

Bukti dalam penelitian sebelumnya (DeFond et al, 2005;. Carcello et al, 2006;.. Dhaliwal et al, 2006; Krishnan dan Visvanathan, 2008) menunjukkan bahwa ACFE dikaitkan dengan kemungkinan peningkatan kualitas pelaporan keuangan. Studi ini memberikan wawasan yang mana dari kedua jenis keahlian keuangan lebih mungkin berhubungan dengan kualitas laporan keuangan. Kami memperkirakan dalam H1 yang lebih besar ACFE [4] akan dikaitkan dengan kemungkinan lebih rendah penyalahgunaan aset. H2A dan H2B menganggap ini asosiasi untuk keahlian non-akuntansi akuntansi dan keuangan secara terpisah. Menyatakan secara resmi, mereka adalah sebagai berikut:

H1. Sebagai persentase anggota dengan keahlian di bidang keuangan dalam meningkatkan AC, kemungkinan penyalahgunaan aset berkurang perusahaan publik. H2A. Sebagai persentase keahlian akuntansi memberswith dalam meningkatkan theAC, yang kemungkinan penyalahgunaan aset berkurang perusahaan publik. H2B. Sebagai persentase keahlian non-akuntansi memberswith dalam meningkatkan theAC, kemungkinan penyalahgunaan aset berkurang perusahaan publik.

Beasley et al. (1999) direksi diklasifikasikan ke dalam tiga kategori: (1) dalam direktur; (2) direktur abu-abu, dan (3) direktur luar.

Mereka menemukan bahwa hanya 38 persen perusahaan mengalami penipuan telah AC terdiri sepenuhnya dari direktur independen. Direktur independen adalah anggota yang tidak memiliki diungkapkan hubungan dengan perusahaan selain kepemilikan saham mungkin.

Abbott et al. (2000) menemukan bahwa perusahaan dengan AC terdiri dari direktur independen cenderung dikenakan sanksi untuk kegiatan penipuan. Penipuan dalam laporan keuangan lebih cenderung terjadi di mana AC tidak independen (Uzan et al, 2004.). Demikian pula, Mustafa dan Meier (2006) menguji efektivitas dari AC dalam mengurangi penyalahgunaan aset oleh karyawan. Mereka menemukan bahwa proporsi direktur independen di AC meningkat, kemungkinan penyalahgunaan aset menurun. CHAPPLE et al. (2009) juga menemukan bahwa tingkat yang lebih tinggi kemerdekaan pada AC dikaitkan dengan kemungkinan lebih rendah dari penyalahgunaan.

Studi ini mendukung gagasan bahwa independensi anggota AC lebih mungkin berhubungan dengan kualitas laporan keuangan. Selain kemerdekaan, BRC (1999) dan US Congress (2002) Pasal 407 mengharuskan anggota AC untuk memiliki keahlian akuntansi atau manajemen yang terkait keuangan yang akan efektif dalam memantau perusahaan. Mereka harus melek finansial atau menjadi melek finansial dalam waktu yang wajar setelah janji mereka. Kami memperkirakan dalam H3 bahwa independensi anggota AC dengan keahlian keuangan akan terkait dengan kemungkinan lebih rendah penyalahgunaan aset. Hipotesis alternatif berikut akan diuji:

H3. Sebagai persentase anggota independen dengan keahlian di bidang keuangan dalam meningkatkan AC, kemungkinan penyalahgunaan aset di publik yang diselenggarakan perusahaan menurun.

Prosedur pemilihan sampel Tugas-tugas berikut dilakukan untuk mengidentifikasi perusahaan publik penderitaan penyalahgunaan aset oleh karyawan selama periode 1987-2000: (1) Sebuah pencarian Lexis-Nexis Penelitian 7.1 Perangkat Lunak, Bisnis / Keuangan Berita dilakukan untuk mengidentifikasi artikel yang laporan berita penyalahgunaan. Pencarian termasuk kata-kata kunci berikut: pencurian atau penggelapan! atau pencurian atau menyalahgunakan! atau mencuri!. Pencarian dilakukan untuk periode antara 1 Januari 1987 dan 31 Desember 2001. (2) Peninjauan artikel berita dengan menggunakan "KWIC Lihat" dilakukan untuk memutuskan apakah artikel laporan kasus penyalahgunaan aset oleh karyawan atau tidak. "KWIC Lihat" dokumen-dokumen yang ditampilkan dalam "kata kunci dalam konteks" format, menunjukkan masing-masing dari istilah pencarian dikelilingi oleh jendela teks. Format ini membantu untuk menentukan dengan cepat apakah dokumen itu berlaku atau tidak. (3) Suatu penelaahan terhadap artikel berita yang berlaku dengan menggunakan "tampilan penuh" dilakukan dengan tujuan untuk mendapatkan rincian lebih lanjut tentang kasus itu. Dalam tugas ini, tujuan utama, setelah memeriksa bahwa artikel berita relevan dengan penelitian ini, adalah untuk mendapatkan nama perusahaan. (4) Sebuah pencarian Lexis-Nexis, AS Laporan Perusahaan Publik, Perusahaan AS Laporan, dan Laporan

Perusahaan Swasta AS dilakukan dengan menggunakan nama perusahaan yang diidentifikasi dalam Task (3) untuk menyelidiki apakah perusahaan itu publik diadakan atau tidak. Selain itu, pencarian ini mengidentifikasi nama perusahaan induk ketika perusahaan penyalahgunaan adalah anak perusahaan. (5) Sebuah pencarian Lexis-Nexis, US News Gabungan dan Bisnis / Keuangan News dilakukan dengan menggunakan nama perusahaan yang diidentifikasi dalam Task (4). Tujuan dari tugas ini adalah untuk mengambil rincian tentang penggelapan seperti judul (s) dari koruptor (s), jumlah, waktu, dan durasi penyimpangan tersebut. Kasus penyalahgunaan lebih dari $ 50,000 wereincluded dalam sampel hanya jika tanggal penyalahgunaan sudah mulai dikenal dan jika kasus melibatkan kolusi dengan orang luar. Luar adalah orang-orang luar perusahaan, seperti anggota keluarga, pemasok, dan pelanggan yang bekerja sama dengan karyawan di perusahaan tersebut untuk melakukan penggelapan tersebut.

penelitian adalah 28 perusahaan mengalami penyalahgunaan aset dan 28 cocok-kontrol perusahaan. Tabel Aku memberikan karakteristik kasus penyalahgunaan seperti ukuran perusahaan, durasi kasus penggelapan di bulan, jumlah semua embezzlers, jumlah embezzlers karyawan, dan jumlah penggelapan tersebut.

Rata-rata, kasus penggelapan terus selama 32 bulan sebelum ditemukan atau dihentikan. Kasus penggelapan terpanjang berlangsung selama sepuluh tahun. Jumlah rata-rata sekitar delapan embezzlers (yaitu 8,32) dan jumlah rata-rata embezzlers karyawan sekitar empat (yaitu 4,04).

Perusahaan diharapkan untuk mengadopsi perubahan dalam praktik mereka mempekerjakan anggota AC dalam periode pasca-SOX untuk mematuhi peraturan baru. periode sampel kami dibatasi pada periode antara 1987 dan 1998, sehingga untuk menghindari dampak dari SOX dan peraturan baru. Be'dard et al. (2004) mengemukakan bahwa masa depan peneliti menggunakan periode waktu tersebut untuk menyelidiki isu-isu seperti yang diselidiki dalam makalah kami, yaitu untuk memeriksa perusahaan yang secara sukarela mengadopsi praktik tata terbaik yang berhubungan dengan keahlian AC sebelum rilis SOX rekomendasi untuk meningkatkan efektivitas perusahaan AC pada tahun 2002 (DeFond et al, 2005.).

Variabel pengukuran dalam model-model penelitian Sebelum studi digunakan pernyataan proxy perusahaan untuk menentukan keahlian keuangan anggota AC perusahaan (Agrawal dan Chadha, 2005; Abbott et al, 2004.). Meninjau laporan proxy terlalu ketat dan bisa bermasalah, karena dalam banyak kasus laporan proxy berisi informasi tentang pengalaman kerja anggota AC untuk terbaru tahun saja. Setelah Dhaliwal et al. (2006) studi, kami mempertimbangkan sumber-sumber tambahan informasi untuk meningkatkan validitas konstruk tindakan keahlian keuangan. Kami menggunakan "Google Search" untuk mendapatkan informasi tambahan tentang keahlian AC dari sumber-sumber online lainnya seperti website perusahaan dan siaran pers.

Jumlah kasus Maksimum Minimum Mean SD

Ukuran perusahaan ($ juta) 28 80,41 237,706.00 31,654.72 52,419.74 Durasi penggelapan dalam bulan 28 1,00 31,86 120,00 28,04 Jumlah semua embezzlers 25 2,00 45.00 11,55 8,32 Jumlah karyawan embezzlers 26 1,00 30,00 4,04 7,13 Jumlah penggelapan ($ 000) 28 100,00 73,000.00 13,950.18 21,350.95 Tabel I. Karakteristik kasus-kasus penyalahgunaan

Setelah Zhang et al. (2007) studi, kami mengklasifikasikan seseorang sebagai ACCFE jika / nya biografinya berisi setidaknya satu dari judul berikut: CPA, akuntan manajemen bersertifikat (CMA), petugas akuntansi kepala, petugas prinsip akuntansi, auditor. Hal ini konsisten dengan aturan (2002) awalnya diusulkan SEC untuk melaksanakan Pasal 407 dengan coding anggota sebagai ACCFE hanya jika biodata mereka menunjukkan bahwa mereka memiliki kualifikasi spesifik tertentu yang dijelaskan dalam definisi SEC. Kemudian, kita mengklasifikasikan sebagai anggota NONACCEXP AC biografi mereka yang berisi minimal salah satu judul berikut: CEO, COO, dan ketua dewan. Konsisten dengan Zhang et al. (2007) dan Carcello et al. (2006), kita mendefinisikan persentase anggota AC pakar keuangan sebagai persentase (PERFINEXP) kedua kategori [5] dikombinasikan.

Dalam rangka untuk menangkap dampak penambahan keahlian AC pada penyalahgunaan aset, kami menyertakan sepuluh variabel kontrol yang diambil dari literatur. Sebelum penelitian memeriksa jumlah pertemuan AC (Abbott et al, 2004;. Agrawal dan Chadha, 2005; DeFond et al, 2005; Zhang et al, 2007)... Kami kontrol terhadap ketekunan AC dengan memasukkan jumlah rapat audit selama tahun sebelum terjadinya penyalahgunaan aset (AUDITMEET).

SAS Nomor 99 daftar omset yang tinggi anggota di dewan direksi sebagai faktor risiko. Beasley (1994, 1996) menemukan bahwa rata-rata masa jabatan direktur luar secara signifikan lebih pendek pada perusahaan penipuan daripada tidak ada perusahaan-penipuan. Mustafa dan Meier (2006) menemukan bahwa masa jabatan anggota AC rata-rata perusahaan mengalami penyalahgunaan aset secara signifikan lebih pendek daripada perusahaan tidak mengalami penyalahgunaan aset. Anggota dengan jangka pendek mungkin terlalu dipengaruhi bymanagerswho baru-baru ini mencalonkan mereka, dan dengan demikian mungkin kurang independen. Selain itu, seorang anggota dengan jangka pendek memiliki pengalaman kurang dengan perusahaan dan, dengan demikian, mungkin kurang efektif. Oleh karena itu, masa jabatan rata-rata di tahun allmembers di theAC pada dewan direksi pada tahun sebelum terjadinya penyalahgunaan aset (TENRAUDIT) dimasukkan sebagai variabel kontrol dalam model penelitian.

Direksi memainkan peran penting dalam mengendalikan kegiatan manajemen dalam perusahaan publik. AC tidak akan berfungsi efektif jika dewan direksi tidak memberikan pengawasan yang efektif (Beasley dan Salterio, 2001). Model penelitian kami meliputi variabel kontrol berikut empat berkaitan dengan dewan direksi: persentase saham biasa yang dimiliki oleh anggota dalam dewan direksi pada tahun sebelum terjadinya penyalahgunaan aset (OWNRBORD), persentase luar anggota dewan direksi pada

tahun sebelum terjadinya penyalahgunaan aset (OUTBORD), jumlah anggota dewan pada tahun sebelum terjadinya penyalahgunaan aset (TOTABORD), dan variabel dummy dengan nilai satu ketika ketua dewan direksi adalah CEO / pemimpin perusahaan pada tahun sebelum terjadinya penyalahgunaan, dan nilai nol dinyatakan (KURSI).

SAS Nomor 99 tercatat beberapa faktor risiko yang berhubungan dengan kerentanan aset penyalahgunaan, termasuk: sejumlah besar kas atau dalam proses, persediaan yang besar, dan mudah aset konversi. Komposisi aset perusahaan telah diterapkan dalam literatur sebelumnya untuk memprediksi penipuan (Loebbecke et al, 1989;. Bell et al, 1991.; Beasley, 1996 dan 1997 Hijau dan Choi,). Aktiva lancar seperti kas dan persediaan lebih rentan terhadap pencurian dibanding aset lain (Strawser, 1997). Orang (1995) menemukan bahwa perusahaan mengalami penipuan berbeda secara signifikan dari penipuan yang tidak mengalami dalam aspek tertentu. Perusahaan mengalami penipuan yang lebih kecil dalam ukuran, memiliki asset turnover rendah dan proporsi yang lebih tinggi dari aktiva lancar, terutama persediaan dan piutang.

Selain itu, Perusahaan