Informal interactions between audit committees and internal audit functions : exploratory evidence and directions for future research

Purpose – This paper aims to recognise the importance of informal processes within corporate governance and complement existing research in this area by investigating factors associated with the existence of informal interactions between audit committees and internal audit functions and in providing directions for future research. Design/methodology/approach – To examine the existence and drivers of informal interactions between audit committees and internal audit functions, this paper relies on a questionnaire survey of chief audit executives (CAEs) in the UK from listed and non-listed, as well as financial and non-financial, companies. While prior qualitative research suggests that informal interactions do take place, most of the evidence is based on particular organisational setting or on a very small range of interviews. The use of a questionnaire enabled the examination of the existence of internal interactions across a relatively larger number of entities. Findings – The paper finds evidence of audit committees and internal audit functions engaging in informal interactions in addition to formal pre-scheduled regular meetings. Informal interactions complement formal meetings with the audit committee and as such represent additional opportunities for the audit committees to monitor internal audit functions. Audit committees’ informal interactions are significantly and positively associated with audit committee independence, audit chair’s knowledge and experience, and internal audit quality. Originality/value – The results demonstrate the importance of the background of the audit committee chair for the effectiveness of the governance process. This is possibly the first paper to examine the relationship between audit committee quality and internal audit, on the existence and driver of informal interactions. Policy makers should recognize that in addition to formal mechanisms, informal processes, such as communication outside of formal pre-scheduled meetings, play a significant role in corporate governance.

The Corporate Governance Effects of Audit Committee

This chapter 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 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 behavior. 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: (1) greater consideration of the organizational and institutional contexts in which audit committees operate; (2) explicit theorization of the processes associated with audit committee operation; (3) complementing extant research methods with field studies; and (4) investigation of unintended as well as expected consequences of audit committees.

Corporate governance in 2010 : what will change?

2010 is expected to see the publication of a new UK Code on Corporate Governance, replacing the Combined Code. Why is a new code being issued? What significant changes are proposed? WIll it change the corporate governance world?

Nonprofit Service Delivery for Government : Accountability Relationships and Mechanisms

When government purchases social services under contract from a nonprofit organisation, a clear accountability relationship is created. The NPO must give an account for the use of the funds and achievement of outcomes to the funder. This paper explores how accountability is enacted in two different types of funding relationships in Queensland. Support is found for the argument that different relationships have different approaches to accountability.

Stress at the synapse : signal transduction mechanisms of adrenal steroids at neuronal membranes

As the key neuron-to-neuron interface, the synapse is involved in learning and memory, including traumatic memories during times of stress. However, the signal transduction mechanisms by which stress mediates its lasting effects on synapse transmission and on memory are not fully understood. A key component of the stress response is the increased secretion of adrenal steroids. Adrenal steroids (e.g., cortisol) bind to genomic mineralocorticoid and glucocorticoid receptors (gMRs and gGRs) in the cytosol. In addition, they may act through membrane receptors (mMRs and mGRs), and signal transduction through these receptors may allow for rapid modulation of synaptic transmission as well as modulation of membrane ion currents. mMRs increase synaptic and neuronal excitability; mechanisms include the facilitation of glutamate release through extracellular signal-regulated kinase signal transduction. In contrast, mGRs decrease synaptic and neuronal excitability by reducing calcium currents through N-methyl-D-aspartate receptors and voltage-gated calcium channels by way of protein kinase A- and G protein-dependent mechanisms. This body of functional data complements anatomical evidence localizing GRs to the postsynaptic membrane. Finally, accumulating data also suggest the possibility that mMRs and mGRs may show an inverted U-shaped dose response, whereby glutamatergic synaptic transmission is increased by low doses of corticosterone acting at mMRs and decreased by higher doses acting at mGRs. Thus, synaptic transmission is regulated by mMRs and mGRs, and part of the stress signaling response is a direct and bidirectional modulation of the synapse itself by adrenal steroids.

Institutional investors, risk/performance and corporate governance

Modern portfolio theory suggests that investors minimize risk for a given level of expected return by carefully choosing the proportions of various assets. This study sets out to determine the role of the institutional investor in monitoring risk and firm performance. Using a sample of Australian firms from 2006 to 2008, our empirical study shows a positive association between firm-specific risk, risk-management policy, and performance for firms with increasing institutional shareholdings. The study also finds that the significance of this association depends on the institutional investor's ability to influence management, which in turn depends on the size of ownership and whether the investee firm does not have potential business dealings with the investor. We also find that when firms are financially distressed, institutional investors engage in promoting short-term performance or exit rather than support long-term value creation. The results are robust while controlling the potential for endogeneity and using sensitivity tests to control for variants of performance and risk. These findings add to the growing body of literature examining institutional ownership and the importance of understanding the role of risk-management in the risk and return relation.

A study of safety leadership and safety governance for board members and senior executives

This thesis is an investigation of the fields of leadership and corporate governance in the context of workplace safety. The research has made a contribution by defining four criteria of safety leadership and applying these criteria to board members, senior executives and written communications. The thesis outlines the findings of two studies; the first is an analysis of public disclosures in ASX200 annual reports and CSR reports, and the second comprises two case studies of large Australian companies including interviews with board members and senior executives. The concept of safety governance is defined and a safety governance framework is developed.

Cytokine expression and secretion by skeletal muscle cells : regulatory mechanisms and exercise effects

Cytokines are important mediators of various aspects of health and disease, including appetite, glucose and lipid metabolism, insulin sensitivity, skeletal muscle hypertrophy and atrophy. Over the past decade or so, considerable attention has focused on the potential for regular exercise to counteract a range of disease states by modulating cytokine production. Exercise stimulates moderate to large increases in the circulating concentrations of interleukin (IL)-6, IL-8, IL-10, IL-1 receptor antagonist, granulocyte-colony stimulating factor, and smaller increases in tumor necrosis factor-α, monocyte chemotactic protein-1, IL-1β, brain-derived neurotrophic factor, IL-12p35/p40 and IL-15. Although many of these cytokines are also expressed in skeletal muscle, not all are released from skeletal muscle into the circulation during exercise. Conversely, some cytokines that are present in the circulation are not expressed in skeletal muscle after exercise. The reasons for these discrepant cytokine responses to exercise are unclear. In this review, we address these uncertainties by summarizing the capacity of skeletal muscle cells to produce cytokines, analyzing other potential cellular sources of circulating cytokines during exercise, and discussing the soluble factors and intracellular signaling pathways that regulate cytokine synthesis (e.g., RNA-binding proteins, microRNAs, suppressor of cytokine signaling proteins, soluble receptors).

Is climate change litigation an effective strategy for promoting greater action to address climate change? What other legal mechanisms might be appropriate?

In recent times a widespread consensus on the reality and gravity of anthropogenic climate change has emerged. Perceived inadequacies in the Australian government’s legal and policy responses to climate change issues have resulted in environmental activists increasingly turning to the courts as a strategy to promote greater action to address adverse climate impacts. The efficacy of this strategy for achieving climate goals is limited by the time and expense of litigating, the restrictions inherent in environmental law administrative challenges, and the possibility that judicial decisions may be overruled by the legislature. To date, climate change litigation in Australia has met with varied success, yet its significance extends beyond the court room as an important mechanism for raising public, political and commercial awareness about climate change issues. Ultimately, however, the types of far-reaching changes needed to mitigate and manage adverse climate impacts require strong regulatory backing. The most effective approach to addressing the complex challenges posed by climate change is a coordinated suite of regulatory measures spearheaded by the Federal Government.

Analysing governance of Australia's system of landscape-based greenhouse gas abatement

Healthy governance systems are key to delivering effective outcomes in any broad domain of natural resource management (NRM). One of Australia's emerging NRM governance domains is our national framework for greenhouse gas abatement (GGA), as delivered through a wide range of management practices in the Australian landscape. The emerging Landscape-Based GGA Domain represents an innovative governance space that straddles both the nation's broader NRM Policy and Delivery Domain and Australia's GGA Domain. As a point-in-time benchmark, we assess the health of this hybrid domain as it stood at the end of 2013. At that time, the domain was being progressed through the Australian government's Clean Energy Package and, more particularly, its Carbon Farming Initiative (CFI). While significant changes are currently under development by a new Australian government, this paper explores key areas of risk within the governance system underpinning this emerging hybrid domain at that point in time. We then map some potential reform or continuous improvement pathways required (from national to paddock scale) with the view to securing improved landscape outcomes over time through widespread GGA activities.

Enterprise business technology governance: A validation of three technology-governance competencies for boards of directors

The competent leadership and governance of digital transformation needs to involve the board of directors. The reported lack of such capability in boards is becoming a pressing issue. Underpinning leadership in such transformation are the competencies to effectively govern Enterprise Technology (ETG). In this paper we take the position that ETG competencies are essential in boards because competent enterprise business technology governance has been shown to contribute to increased revenue, profit, and returns. We report the industry validation processes of a set of three board-of-director competencies needed for effective ETG related to strategy and planning; investment and risk; and, innovation and value creation. We conclude that gaps in board ETG competence remain.