The corporate governance effects of audit committees

Arguments associated with the promotion of audit committees in many countries are premised on their potential for alleviating weaknesses in corporate governance. This paper provides a synthesis and evaluation of empirical research on the governance effects associated with audit committees. Given recent policy recommendations in several countries aimed at strengthening these committees, it is important to establish what research evidence demonstrates about their existing governance contribution. A framework for analyzing the impact of audit committees is described, identifying potential perceived effects which may have led to their adoption and documented effects on aspects of the audit function, on financial reporting quality and on corporate performance. It is argued that there is only limited and mixed evidence of effects to support claims and perceptions about the value of audit committees for these elements of governance. It is also shown that most of the existing research has focused on factors associated with audit committee existence, characteristics and measures of activity and there is very little evidence on the processes associated with the operation of audit committees and the manner in which they influence organizational behaviour. It is clear that there is no automatic relationship between the adoption of audit committee structures or characteristics and the achievement of particular governance effects, and caution may be needed over expectations that greater codification around factors such as audit committee members’ independence and expertise as the means of ‘‘correcting’’ past weaknesses in the arrangements for audit committees. The most fundamental question concerning what difference audit committees make in practice continues to be an important area for research development. For future research we suggest: (i) greater consideration of the organizational and institutional contexts in which audit committees operate; (ii) explicit theorization of the processes associated with audit committee operation; (iii) complementing extant research methods with field studie, and; (iv) investigation of unintended (behavioural) as well as expected consequences of audit committees.

The cytochrome P-450 isoenzyme CYP2E1 in the biological processing of industrial chemicals : consequences for occupational and environmental medicine

The importance of the isoform CYP2E1 of the human cytochrome P-450 superfamily of enzymes for occupational and environmental medicine is derived from its unique substrate spectrum that includes a number of highly important high-production chemicals, such as aliphatic and aromatic hydrocarbons, solvents and industrial monomers (i.a. alkanes, alkenes, aromatic and halogenated hydrocarbons). Many polymorphic genes, such as CYP2E1, show considerable differences in allelic distribution between different human populations. The polymorphic nature of the human CYP2E1 gene is significant for inter-individual differences in toxicity of its substrates. Since the substrate spectrum of CYP2E1 includes many compounds of basic relevance to industrial toxicology, a rationale for metabolic interactions of different CYP2E1 substrates is provided. In-depth research into the inter-individual phenotypic differences of human CYP2E1 enzyme activities was enabled by the recognition that the 6-hydroxylation of the drug chlorzoxazone is mediated by CYP2E1. Studies on CYP2E1 phenotyping have pointed to inter-individual variations in enzyme activities. There are consistent ethnic differences in CYP2E1 enzyme expression, mostly demonstrated between European and Japanese populations, which point to a major impact of genetic factors. The most frequently studied genetic polymorphisms are the restriction fragment length polymorphisms PstI/RsaI (mutant allele: CYP2E1*5B) located in the 5′-flanking region of the gene, as well as the DraI polymorphism (mutant allele: CYP2E1*6) located in intron 6. These polymorphisms are partly related, as they form the common allele designated CYP2E1*5A. Striking inter-ethnic differences between Europeans and Asians appear with respect to the frequencies of the CYP2E1*5A allele (only approximately 5% of Europeans are heterozygous, but 37% of Asians are, whilst 6% of Asians are homozygous). Available studies indicate a wide variation in human CYP2E1 expression, which are very likely based on complex gene-environment interactions. Major inter-ethnic differences are apparent on the genotyping and the phenotyping levels. Selected cases are presented where inter-ethnic variations of CYP2E1 may provide likely explanations for unexplained findings concerning industrial chemicals that are CYP2E1 substrates. Possible consequences of differential inter-individual and inter-ethnic susceptibilities are related to individual expressions of clinical symptoms of chemical toxicity, to results of biological monitoring of exposed workers, and to the interpretation of results of epidemiological or molecular-epidemiological studies.

Markers of genetic susceptibility in human environmental hygiene and toxicology : the role of selected CYP, NAT and GST genes

Inherited genetic traits co-determine the susceptibility of an individual to a toxic chemical. Special emphasis has been put on individual responses to environmental and industrial carcinogens, but other chronic diseases are of increasing interest. Polymorphisms of relevant xenobiotic metabolising enzymes may be used as toxicological susceptibility markers. A growing number of genes encoding enzymes involved in biotransformation of toxicants and in cellular defence against toxicant-induced damage to the cells has been identified and cloned, leading to increased knowledge of allelic variants of genes and genetic defects that may result in a differential susceptibility toward environmental toxicants. "Low penetrating" polymorphisms in metabolism genes tend to be much more common in the population than allelic variants of "high penetrating" cancer genes, and are therefore of considerable importance from a public health point of view. Positive associations between cancer and CYP1A1 alleles, in particular the *2C I462V allele, were found for tissues following the aerodigestive tract. Again, in most cases, the effect of the variant CYP1A1 allele becomes apparent or clearer in connection with the GSTM1 null allele. The CYP1B1 codon 432 polymorphism (CYP1B1*3) has been identified as a susceptibility factor in smoking-related head-and-neck squameous cell cancer. The impact of this polymorphic variant of CYP1B1 on cancer risk was also reflected by an association with the frequency of somatic mutations of the p53 gene. Combined genotype analysis of CYP1B1 and the glutathione transferases GSTM1 or GSTT1 has also pointed to interactive effects. Of particular interest for the industrial and environmental field is the isozyme CYP2E1. Several genotypes of this isozyme have been characterised which seem to be associated with different levels of expression of enzyme activity. The acetylator status for NAT2 can be determined by genotyping or by phenotyping. In the pathogenesis of human bladder cancer due to occupational exposure to "classical" aromatic amines (benzidine, 4-aminodiphenyl, 1-naphthylamine) acetylation by NAT2 is regarded as a detoxication step. Interestingly, the underlying European findings of a higher susceptibility of slow acetylators towards aromatic amines are in contrast to findings in Chinese workers occupationally exposed to aromatic amines which points to different mechanisms of susceptibility between European and Chinese populations. Regarding human bladder cancer, the hypothesis has been put forward that genetic polymorphism of GSTM1 might be linked with the occurrence of this tumour type. This supports the hypothesis that exposure to PAH might causally be involved in urothelial cancers. The human polymorphic GST catalysing conjugation of halomethanes, dihalomethanes, ethylene oxide and a number of other industrial compounds could be characterised as a class theta enzyme (GSTT1) by means of molecular biology. "Conjugator" and "non-conjugator" phenotypes are coincident with the presence and absence of the GSTT1 gene. There are wide variations in the frequencies of GSTT1 deletion (GSTT1 *0/0) among different ethnicities. Human phenotyping is facilitated by the GST activity towards methyl bromide or ethylene oxide in erythrocytes which is representative of the metabolic GSTT1 competence of the entire organism. Inter-individual variations in xenobiotic metabolism capacities may be due to polymorphisms of the genes coding for the enzymes themselves or of the genes coding for the receptors or transcription factors which regulate the expression of the enzymes. Also, polymorphisms in several regions of genes may cause altered ligand affinity, transactivation activity or expression levels of the receptor subsequently influencing the expression of the downstream target genes. Studies of individual susceptibility to toxicants and gene-environment interaction are now emerging as an important component of molecular epidemiology.

Genetic susceptibility to environmental toxicants : the interface between human and experimental studies in the development of new toxicological concepts

The growing knowledge of the genetic polymorphisms of enzymes metabolising xenobiotics in humans and their connections with individual susceptibility towards toxicants has created new and important interfaces between human epidemiology and experimental toxicology. The results of molecular epidemiological studies may provide new hypotheses and concepts, which call for experimental verification, and experimental concepts may obtain further proof by molecular epidemiological studies. If applied diligently, these possibilities may be combined to lead to new strategies of human-oriented toxicological research. This overview will present some outstanding examples for such strategies taken from the practically very important field of occupational toxicology. The main focus is placed on the effects of enzyme polymorphisms of the xenobiotic metabolism in association with the induction of bladder cancer and renal cell cancer after exposure to occupational chemicals. Also, smoking and induction of head and neck squamous cell cancer are considered.

Audit committee effectiveness in a mandatory disclosure environment

This study examines audit committee effectiveness in its association with regulatory compliance in a highly sanctioned environment. It uses the Australian continuous disclosure regime to investigate whether audit committee effectiveness is associated with a higher frequency of disclosures, thereby enhancing the efficiency of the capital market and creating more informed individual investors. The findings show that, as hypothesised, audit committee effectiveness measured as an index composed of sub-components involving audit committee size, meeting frequency, independence, member financial literacy and membership of other audit committees, is positively associated with disclosure frequency. Further tests show that it is the financial literacy sub component which is most implicated in this relationship. Company size, years of listing, the proportion of inventories and receivables to total assets, whether or not the company has been involved in a takeover offer or bid or in changes to its number of shares are significant control variables.

Convergence in European corporate governance : the audit committee concept

This paper analyses recent corporate governance codes issued by 20 countries for evidence of convergence in corporate governance systems in Europe. The analysis shows that there has been a degree of convergence towards an Anglo-Saxon model of corporate governance as the audit committee concept is widely accepted in countries with both unitary and two-tier governance systems. Further, the latest audit committee recommendations in countries that have issued several governance codes show a strengthening of the recommendations for an audit committee over time in line with the Anglo-Saxon audit committee concept and convergence with the debate in the US and UK on issues such as the independence and financial expertise of members. However, consistent with the literature on the convergence of European corporate governance systems, at an operational level there is limited consistency in the recommended structure and role of audit committees.

Audit reports in Australia : 2005-2013: Preliminary Findings

This paper provides a preliminary summary of audit reports for Australian listed public companies for the period 2005 to 2013, focusing on auditor reporting in the most recent period 2011 to 2013. Prior research has shown that audit reports modified for uncertainty relating to the going concern assumption increased following the shock of the Global Financial Crisis (GFC) in late 2007. This occurred in Australia from 2008 where Xu et al. (2011) find that reports modified for going concern uncertainty increase from 12% in 2005 to 2007 to 18% in 2008 and 22% in 2009. Similar trends are observable for the United States as shown by an increase from 14% in 2003 to 21% in 2008 (Cheffers et al. 2010, Geiger et al. 2014). The aim of this report is to examine the frequency of the various types of audit reports issued in Australia during the period 2011 to 2013, with a focus on reports emphasizing significant uncertainty in regard to the going concern assumption.

Environmental, personal, and genetic determinants of response to vitamin D supplementation in older adults

CONTEXT AND OBJECTIVE: Suboptimal vitamin D status can be corrected by vitamin D supplementation, but individual responses to supplementation vary. We aimed to examine genetic and nongenetic determinants of change in serum 25-hydroxyvitamin D (25(OH)D) after supplementation. DESIGN AND PARTICIPANTS: We used data from a pilot randomized controlled trial in which 644 adults aged 60 to 84 years were randomly assigned to monthly doses of placebo, 30 000 IU, or 60 000 IU vitamin D3 for 12 months. Baseline characteristics were obtained from a self-administered questionnaire. Eighty-eight single-nucleotide polymorphisms (SNPs) in 41 candidate genes were genotyped using Sequenom MassArray technology. Serum 25(OH)D levels before and after the intervention were measured using the Diasorin Liaison platform immunoassay. We used linear regression models to examine associations between genetic and nongenetic factors and change in serum 25(OH)D levels. RESULTS: Supplement dose and baseline 25(OH)D level explained 24% of the variability in response to supplementation. Body mass index, self-reported health status, and ambient UV radiation made a small additional contribution. SNPs in CYP2R1, IRF4, MC1R, CYP27B1, VDR, TYRP1, MCM6, and HERC2 were associated with change in 25(OH)D level, although only CYP2R1 was significant after adjustment for multiple testing. Models including SNPs explained a similar proportion of variability in response to supplementation as models that included personal and environmental factors. CONCLUSION: Stepwise regression analyses suggest that genetic variability may be associated with response to supplementation, perhaps suggesting that some people might need higher doses to reach optimal 25(OH)D levels or that there is variability in the physiologically normal level of 25(OH)D.

Mind the insolvency gap : lessons to be learned from audit expectations gap theory

There is a general perception that public confidence in the insolvency profession is low as the result of the recent unethical practices of a few high profile liquidators. As a result, the effectiveness of the current regulatory mechanisms has been questioned, leading to a review of the performance of insolvency practitioners and subsequent regulation proposals. The challenge for the insolvency profession is balancing the expectations of the general public whilst ensuring that the obligations and duties imposed upon them are performed to acceptable and realistic standards. It is difficult (if not impossible) for the profession to meet this challenge in the absence of a cohesive framework which identifies those issues that require further regulation as opposed to those that relate to general education on the insolvency process. This paper will examine the audit expectations gap theory in the context of insolvency practitioners and suggests that a model based on this theory provides an effective framework for evaluating the regulation of the insolvency industry.

Use of contract models to improve environmental outcomes in transport infrastructure construction

The type of contract model may have a significant influence on achieving project objectives, including environmental and climate change goals. This research investigates non-standard contract models impacting greenhouse gas emissions (GHG) in transport infrastructure construction in Australia. The research is based on the analysis of two case studies: an Early Contractor Involvement (ECI) contract and a Design and Construct (D&C) contract with GHG reduction requirements embedded in the contractor selection. Main findings support the use of ECIs for better integrating decisions made during the planning phase with the construction activities, and improve environmental outcomes while achieving financial and time savings. Key words: greenhouse gases reduction; road construction; contracting; ECI; D&C

Audit committee effectiveness : informal processes and behavioural effects

Purpose This paper seeks to investigate the conditions and processes affecting the operation and potential effectiveness of audit committees (ACs), with particular focus on the interaction between the AC, individuals from financial reporting and internal audit functions and the external auditors. Design/methodology/approach A case study approach is employed, based on direct engagement with participants in AC activities, including the AC chair, external auditors, internal auditors, and senior management. Findings The authors find that informal networks between AC participants condition the impact of the AC and that the most significant effects of the AC on governance outcomes occur outside the formal structures and processes. An AC has pervasive behavioural effects within the organization and may be used as a threat, an ally and an arbiter in bringing solutions to issues and conflicts. ACs are used in organizational politics, communication processes and power plays and also affect interpretations of events and cultural values. Research limitations/implications Further research on AC and governance processes is needed to develop better understanding of effectiveness. Longitudinal studies, focusing on the organizational and institutional context of AC operations, can examine how historical events in an organization and significant changes in the regulatory environment affect current structures and processes. Originality/value The case analysis highlights a number of significant factors which are not fully recognised either in theorizing the governance role of ACs or in the development of policy and regulations concerning ACs but which impinge on their governance contribution. They include the importance of informal processes around the AC; its influence on power relations between organizational participants; the relevance of the historical development of governance in an organization; and the possibility that the AC’s impact on governance may be greatest in non-routine situations.

Practical analysis of big acoustic sensor data for environmental monitoring

Monitoring the environment with acoustic sensors is an effective method for understanding changes in ecosystems. Through extensive monitoring, large-scale, ecologically relevant, datasets can be produced that can inform environmental policy. The collection of acoustic sensor data is a solved problem; the current challenge is the management and analysis of raw audio data to produce useful datasets for ecologists. This paper presents the applied research we use to analyze big acoustic datasets. Its core contribution is the presentation of practical large-scale acoustic data analysis methodologies. We describe details of the data workflows we use to provide both citizen scientists and researchers practical access to large volumes of ecoacoustic data. Finally, we propose a work in progress large-scale architecture for analysis driven by a hybrid cloud-and-local production-grade website.