Essay About Audit Committee And Hypothesis Development

Hypothesis Development – Essay – yxie78
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Hypothesis Development
Now we comes to the hypothesis development part, this part is about what are the main theory driving to the development of hypothesis. The first item drives the hypothesis development is the BRC recommendation 1& 2, that is the independence requirement.The BRC define the independence directors as not the formal or current employee of the company, has no relative with company’s management and not receive compensation from the company. The second recommendation is BRC state that all listed company with more than 200 million market capitalizations should have audit committee composed entirely of independence directors.Prior research suggest that independence of audit committee can reduce the likelihood of restatement in two ways.First, the independence and effectiveness of the internal audit function are strengthened when it reports directly to an audit committee that instead of report to member of management.Independence allows internal auditor to assess the internal control more objective. Second, independence audit committee may demand greater external audit scope to avoid financial restatement, increase the likelihood the external auditor to detect the misstatement. So with all these, the author believe that the audit committee can strengthen a firm’s internal control structure and increase the effectiveness of external audit. With these expectation, the author comes to first hypothesis, that is the presence of an audit committee comprised entirely of independence directors is associate with lower incidence of financial reporting restatementThe second Hypothesis is develop based on BRC’s third recommendation require. That is the audit committee size.This recommendation require at least 3 audit committee member in the board. The power of the audit committee is related to the size of audit committee, more larger the board, more likely to be  acknowledged as an authoritative body by the external and internal audit function. The increase of power status can lead to internal audit function enhance, this will result in prevent and detect material misstatementsWith these expectation, that lead to the Send Hypothesis, The presence of an audit committee with at least three directors is associated with a lower incidence of restatement.The third hypothesis is develop based on the BRC’s expertise recommendation. The BRC assertion that effective audit committee should include at least one member who is financial expertise.The prior research suggests that audit committee with at least one member with financial expertise is more likely to comprehend the internal audit program. This can ensure the internal control system are in place then lead to increase the effectiveness of internal control in preventing material misstatement.Second, audit committee expertise allows for better understanding of audit issue and risks, then this will increase the likelihood that detected material misstatements.With this expectation, leading to the third hypothesis: The presence of an audit committee with at least one director possessing financial expertise is associated with a lower incidence of restatement. And the last hypothesis is driven by BRC’s other recommendations, the other recommendation is related to diligence of the audit committee.

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(2015, 08). Hypothesis Development. EssaysForStudent.com. Retrieved 08, 2015, from
“Hypothesis Development” EssaysForStudent.com. 08 2015. 2015. 08 2015 < "Hypothesis Development." EssaysForStudent.com. EssaysForStudent.com, 08 2015. Web. 08 2015. < "Hypothesis Development." EssaysForStudent.com. 08, 2015. Accessed 08, 2015. Essay Preview By: yxie78 Submitted: August 25, 2015 Essay Length: 677 Words / 3 Pages Paper type: Essay Views: 404 Report this essay Tweet Related Essays Impact of Prematurity on Development Impact of Premature Birth on Development Years ago, premature birth almost always meant death for the baby. Today, however, we have the technology to nurture 1,434 Words  |  6 Pages Development of Ancient Medicine Many different cultures have tried different methods as to find out about the causes of disease and how to treat different kinds of diseases. Various 1,821 Words  |  8 Pages Development of Popular Operating Systems Technology of a computer fully relies on its operating System. I believe that the operating system pushes the companies to develop better hardware to catch 1,987 Words  |  8 Pages Developments in It - 2000-2008 DEVELOPMENT IN INFORMATION TECHNOLOGY 2000-2008 The epochs in the sphere of Information Technology for this past decade are notable to say the least. While some 1,794 Words  |  8 Pages Similar Topics Media Skills Development Bead Bar Systems Development Project Get Access to 89,000+ Essays and Term Papers Join 209,000+ Other Students High Quality Essays and Documents Sign up © 2008–2020 EssaysForStudent.comFree Essays, Book Reports, Term Papers and Research Papers Essays Sign up Sign in Contact us Site Map Privacy Policy Terms of Service Facebook Twitter