Audit Committee Attributes and Readability of Financial Statement Footnotes

Document Type : Original Article


1 Department of Accounting, Shahid Rajaee Faculty, Vocational University of Khorasan, Khorasan, Iran

2 Department of Accounting, Hakim Nezami institution of higher education Quchan, Quchan, Iran


Purpose: The purpose of this study was to investigate the relationship between audit committee attributes and readability of financial statement footnotes of companies listed in the Iranian Stock Exchange.
Method: The statistical population of this study included all companies listed in Tehran Stock Exchange over a period of 7 years from 2012 to 2018. A systematic elimination method has been used for sampling. Multivariate regression and EViews software were used to test the research models.
Results: The results showed a significant relationship between the independence of the audit committee and the readability of financial statement footnotes. There was also a significant relationship between the number of audit committee meetings and the readability of financial statement footnotes. However, there was no significant relationship between the financial expertise of the audit committee and the readability of financial statement footnotes.
Value: Companies with less readable financial statements are more likely to commit fraud than other companies. The readability of financial reporting plays an important role in enhancing the predictability of fraud in the financial statement. By using sophisticated and lengthy disclosures, managers keep some of their intended information secrets from investors and other stakeholders to avoid disclosing information about their bad news or performance. The results of this study can be applicable for shareholders and investors; securities exchange; universities and research institutes; suppliers of goods and services, and the government. There have also been made very limited efforts, especially in Iran, to investigate the relationship between audit committee attributes and readability of financial statement footnotes, so we address this topic in the present study.


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