Abstract
The importance of corporate governance in ensuring reliable financial reporting is examined in this article, and the roles of individuals involved in the governance process are examined from the perspective of ensuring the common good. Initially, adopting the positivist tradition that dominates the academic literature in accounting, the relations between financial reporting quality and the activities of senior management, the board of directors and its audit committee, and external auditors are examined. Unlike much of the academic literature, this article also adopts a normative perspective and offers suggestions as to the proper roles of these parties. Finally, suggestions for future research are offered.
Similar content being viewed by others
References
Abbott, L., S. Parker, and G. Peters: 2004, ‹Audit Committee Characteristics and Restatements’, Auditing: A Journal of Practice & Theory 23(1), 69–87.
Ahmed, A., and S. Duellman: 2007, ‹Accounting Conservatism and Board of Director Characteristics: An Empirical Analysis’, Journal of Accounting and Economics 43(2–3), 411–437.
Aier, J., J. Comprix, M. Gunlock, and D. Lee: 2005, ‹The Financial Expertise of CFOs and Accounting Restatements’, Accounting Horizons 19(3), 123–135.
C. Andre, and M. Velasquez: 1992, ‹The Common Good’, Issues in Ethics 5(2), 45–60.
Ashbaugh-Skaife, H., D. W. Collins, W. R. Kinney, Jr.: 2007, ‹The Discovery and Reporting of Internal Control Deficiencies Prior to SOX-Mandated Audits’, Journal of Accounting and Economics 44(1–2), 166–192.
Ashbaugh-Skaife, H., D. Collins, and R. LaFond: 2006, ‹The Effects of Corporate Governance on Firms’ Credit Ratings’, Journal of Accounting and Economics 42(1–2), 203–243.
Bamber, M., and V. Iyer: 2007, ‹Auditors’ Identification with Their Clients and Its Effect on Auditors’ Objectivity’, Auditing: A Journal of Practice & Theory 26(2): 1–24.
Bazerman, M. H., G. Loewenstein, and D. A. Moore: 2002, ‹Why Good Accountants Do Bad Audits’, Harvard Business Review 80(11): 96–102.
Beasley, M., J. Carcello, and D. Hermanson: 1999, Fraudulent Financial Reporting: 1987–1997 An Analysis of U.S. Public Companies. Committee of Sponsoring Organizations, New York, NY.
Beasley, M., J. Carcello, D. Hermanson and T. Neal: 2008, ‹The Audit Committee Oversight Process’, Contemporary Accounting Research (forthcoming)
Bell, T. B., W. R. Landsman, and D. A. Shackelford: 2001, ‹Auditors’ Perceived Business Risk and Audit Fees: Analysis and Evidence’, Journal of Accounting Research 39(1): 35–43.
Caramanis, C., and C. Lennox: 2008, ‹Audit Effort and Earnings Management’, Journal of Accounting and Economics 45(1): 116–138.
Carcello, J., C. Hollingsworth, and T. Neal: 2006, ‹Audit Committee Financial Experts: A Closer Examination Using Firm Designations’, Accounting Horizons 20(4): 351–373.
Carcello, J., and A. Nagy: 2004, ‹Client Size, Auditor Specialization and Fraudulent Financial Reporting’, Managerial Auditing Journal 19(5): 651–668.
Charitou, A., C. Louca, and N. Vafeas: 2007, ‹Boards, Ownership Structure, and Involuntary Delisting from the New York Stock Exchange’, Journal of Accounting and Public Policy 26(2), 249–262.
Core, J., R. Holthausen, and D. Larcker: 1999, ‹Corporate Governance, Chief Executive Officer Compensation, and Firm Performance’, Journal of Financial Economics 51(3), 371–406.
DeZoort, F.T., D. R. Hermanson, D. S. Archambeault, and S. A. Reed: 2002, ‹Audit Committee Effectiveness: A Synthesis of the Empirical Audit Committee Literature’. Journal of Accounting Literature 21, 38–75.
Doyle, J., W. Ge, and S. McVay: 2007, ‹Determinants of Weaknesses in Internal Control over Financial Reporting’, Journal of Accounting and Economics 44(1–2), 193–223.
Fich, E. and A. Shivdasani: 2006, ‹Are Busy Boards Effective Monitors?’, The Journal of Finance 61(2), 689–724.
Francis, J.: 2006, ‹Are Auditors Compromised by Nonaudit Services? Assessing the Evidence’, Contemporary Accounting Research 23(3), 747–760.
Francis, J. R., K. Reichelt, and D. Wang: 2005, ‹The Pricing of National and City-Specific Reputations for Industry Expertise in the U.S. Audit Market’, The Accounting Review 80(1), 113–136.
Geiger, M. and D. North: 2006, ‹Does Hiring a New CFO Change Things? An Investigation of Changes in Discretionary Accruals’, The Accounting Review 81(4), 781–809.
Goizueta, R. C.: 1996, ‹The Real Essence of Business’, Speech Before The Executives’ Club of Chicago (November 20, see www.goizuetafoundation.org/essence.htm)
Hermalin, B.: 2005, ‹Trends in Corporate Governance’, The Journal of Finance 60(5), 2351–2384.
Hood, J. M.: 1996, The Heroic Enterprise. Free Press, Glencoe, IL.
Klein, A.: 1998, ‹Firm Performance and Board Committee Structure’, Journal of Law and Economics 41(1), 275–303.
Krishnan, J.: 2005, ‹Audit Committee Financial Expertise and Internal Control: An Empirical Analysis’. The Accounting Review 80(2), 649–675.
Monks, R., and N. Minow: 2004, Corporate Governance. 3. Blackwell Publishing, Malden, MA.
Rossouw, G.J. and A. Sison: 2006, ‹Introduction’, In Global Perspectives on Ethics of Corporate Governance. G.J. Rossouw and A. Sison editors. Palgrave Macmillan, New York, NY.
Smith-Crowe, K., E. Umphress, A. Brief, S. Chan- Serafin and A. Tenbrunsel: 2008, ‹Hierarchy and the Desire to Support It: A Lethal Combination in the Hands of Corrupt Authority Figures’, Working Paper.
Vafeas, N.: 2005, ‹Audit Committees, Boards, and the Quality of Reported Earnings’, Contemporary Accounting Research 22(4), 1093–1122.
Vera-Munõz, S.: 2005, ‹Corporate Governance Reforms: Redefined Expectations of Audit Committee Responsibilities and Effectiveness’, Journal of Business Ethics 62(2), 115–127.
Webley, S.: 1999, ‹Values Inherent in the Interfaith Declaration of International Business Ethics’, In G. Enderle (ed) International Business Ethics: Challenges and Approaches. University of Notre Dame Press, Notre Dame, IN.
Yermack, D.: 2006, ‹Flights of Fancy: Corporate Jets, CEO Perquisites, and Inferior Shareholder Returns’, Journal of Financial Economics 80(1), 211–242.
Zhang, Y., J. Zhou, and N. Zhou: 2007, ‹Audit Committee Quality, Auditor Independence, and Internal Control Weaknesses’, Journal of Accounting and Public Policy 26(3), 300–327.
Acknowledgments
I thank Georges Enderle, Jeff Miller, Ann Tenbrunsel, and the participants at the Ethical Dimensions in Business: Reflections from the Business Academic Community sponsored by Notre Dame’s Institute for Ethical Business Worldwide for their comments.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Carcello, J.V. Governance and the Common Good. J Bus Ethics 89 (Suppl 1), 11–18 (2009). https://doi.org/10.1007/s10551-008-9904-z
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-008-9904-z