The Research On The Effect Of Media Negative Coverage Influence On The Audit Committee Effectiveness

Listed companies financial fraud cases emerge in an endless stream.For example,was exposed to the financial fraud of the Taiyuan Chemical Industry,Boyuan Industry,Geeya Technology,Scenery Culture and so on.With the continuous exposure of the financial fraud scandal,the performance of the audit committee is put to the test,which highlights the urgency of improving the effectiveness of the audit committee.The information reported by the media alleviates the problem of information asymmetry to a certain extent and has a certain degree of supervision over corporate governance.As part of the corporate governance mechanism,negative reports in the media will also have an impact on the effectiveness of the audit committee.According to the previous research literature,the media governance role of the media mainly focused on the financial restatement,internal control,the resignation of independent directors and the protection of small and medium investors,and so on.The research concerned the effectiveness of the audit committee are less.So this paper examines its impact on the effectiveness of the audit committee from the number and extent of negative media coverage.This paper refers to previous research results and combines actual conditions in China,and uses media negative reports as a starting point to conduct in-depth research and discussion on the impact of the audit committee on its effectiveness.For the continuity of media supervision,this article selects A-share companies that set up an audit committee from 2014 to 2016 and has corresponding negative reports in the previous year as a sample of the study.At the same time,a corresponding number of companies with no negative reports are selected as matching samples,and multiple regression is used.The audit opinion was selected and the auditor replaced the non-unreserved audit opinion as the surrogate variable for the effectiveness of the audit committee to study the impact of media negative reports on the effectiveness of the audit committee.In the media of newspapers,the number of negative reports in the media selects negative reports with obvious doubts,criticisms and other negative vocabularies as negative reports.For neutral reports,the analysis of the issues in the annual report of the company is considered as a negative report.And other non-negative reports.The degree of media coverage is divided into general negative reports and severe negative reports.Based on principal-agent theory,corporate governance theory,reputation theory,and signal transmission theory,the paper first studied the number of negative media reports on audits.The impact of the effectiveness of the committee further studied the impact of the extent of media negative reporting on the effectiveness of the audit committee.The study found that the number of media negative reports has a significant negative impact on the audit opinion,the number of negative media coverage of the accounting firm replaced by a non-standard audit opinion by the impact is not significant.The negative coverage of the media has some influence on the financial control function and communication function of the audit committee,and the supervisory function of the audit committee is not significant.In terms of the negative coverage of the media,the negative impact of negative reports on the audit opinion is more pronounced,that is,the negative reports of the previous year's severity have a certain effect on the financial control functions and communication functions of the Audit Committee.Negative reports,the dissemination of information to make the Audit Committee to be more vigilant,concerned about the listed companies in the possible problems,at the same time for their own reputation considerations,will be more in place to fulfill their duties,thereby enhancing the effectiveness of the audit committee.In this regard,this article proposes corresponding recommendations from both the media and the audit committee.The media mainly proposes corresponding recommendations from the perspective of capital market supervision and the company.In terms of the media,firstly,enterprises should attach importance to the supervision role of the media as an external governance mechanism.Secondly,the state clearly defines the legal position of the media as public opinion supervision.Thirdly,the media itself should attach importance to its role.In terms of the audit committee,it strengthened the information disclosure of the audit committee.The existing literature mostly studies the impact of the internal characteristics of the audit committee on the effectiveness of the audit committee,such as the establishment,composition,diligence,and authority of the audit committee.Few scholars from the media negatively report this external governance mechanism to study its impact on the effectiveness of the audit committee.This article first analyzes the impact of negative media reports on the effectiveness of the audit committee.Based on this,the negative media reports are divided into general and severity levels to study their impact on the effectiveness of the audit committee.