Valuing

This research argues that cognition is value laden. ‘Valuing’ something to be either right or wrong is relatively closer to a deduction from past experience. Valuing accounts have two components - the value - ranging from positive, to neutral, and then to negative, and the objects that are being valued, i.e. the experience. Table 6-15 below categorises the valuing accounts captured and analysed in this research.

Table 6-15: Valuing accounts Sub-nodes of ‘Valuing’ accounts No. of interviewees Examples Positive valuing Satisfaction 21 Interviewee 13:

“Most people regard this as way over the top. Hum… there is no other more comprehensive… charter that I’ve ever seen in New Zealand. But another reality is everyone is using it as a model. And the auditors themselves will… I know because they told me… when their clients are asking… when they are pointing at a good charter. That is the one (from our

company).”

Positive valuing

Comfort 17

Interviewee 10:

“It’s only three of us (in the last audit committee meeting). It’s very amicable. In fact it’s almost… probably because of that, it’s almost light-hearted. Not to say that it is not serious, but the way we go about it is… you know…it was quite easy going, minimal tension. There were some discussions

between the management and the auditors. But everything was resolved.”

Neutral valuing

Reliance

16

Interviewee 01:

“They (the accountant and the bookkeeper) actually dealt with them (the auditors) most of the time. So it is important, as I don’t have to do much. I just met with them a couple of times and then did the reviews. I think the biggest thing is that it is really quite relaxed, not a stressful process.”

147 Sub-nodes of ‘Valuing’ accounts No. of interviewees Examples Neutral valuing Importance 21 Interviewee 04:

“When Sarbanes-Oxley came with all the new requirements… all that sort of thing, they became very clear very quickly. (So) that the auditors and the audit committee members would need to come to speed what those requirements were. That meant a lot of personal time studying and understanding and learning what they mean. Then you can ask the right question to management.”

Neutral valuing

Fairness

7

Interviewee 19:

“Well… I’m not complaining about it. We don’t pay huge fees, and for the audit committee… for the standard

committee fees is a thousand dollars a half day. I’d probably get two thousand dollars if I went to the meetings from Wellington and back. Those locals are getting one thousand dollars.”

Negative valuing

Disappointment

16

Interviewee 17:

“He (the internal auditor) made a comment about it during the meeting, but that caused an eruption because he hadn’t discussed it with the executive but brought it straight to the audit committee. You know… I had several phone calls after the meeting… I am the chairman of that one. Well I’m not sure how much time I spent just to find out and to follow up about where it got to. Well, they (the management) got offended because he didn’t consult their opinion first.”

Negative valuing

Opposition

17

Interviewee 21:

“Huh… I mean an audit committee… if you define it, it is for auditing. I mean it is auditing risk… it is auditing

compliance… compliance with the IFRS, if you like… that is a reasonable expectation from the shareholder. So they are audited honestly. But… but… you know… some audit committees start taking on the role of God! They think they are the company, I think that’s wrong. So I think there needs to be a balance…”

Interviewee 18:

“Look, I’m not at all comfortable with this. But in that

company, they asked the audit committee to have a look at the year end result, and make a recommendation on what the dividend should be. And twice now, the board has rejected our recommendations on dividend, which is quite important you know. We just had to… huh… it is a little bit frustrating for me when that happens, because if that is the case, they really shouldn’t ask us to recommend.”

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In contrast to the believing accounts discussed in the previous section, which were commonly supported by indirect experiences, the valuing accounts were usually supported by remembering accounts (i.e. the real encounters of the interviewees, or something that factually took place in their audit committees). In other words, believing accounts revealed that the interviewees intentively justified their audit committee effectiveness through what they believed acceptable, whereas valuing accounts represented their own acceptance or rejection of what they had personally experienced. This is particularly noticeable when some of the anecdotal

accounts by interviewees are considered in terms of their ‘value’. This is illustrated in Table 6- 16.

Table 6-16: Anecdotes

Interviewee Anecdote ‘Valuing’ interpretation

01

Not being able to find an auditor after the corporate governance and auditing regulations tightened.

The regulations are not being helpful, but scared the auditors away, which was frustrating to him.

02

Implementing an advanced retail store’s internal control and audit mechanism greatly improved the company’s performance.

The audit committee had made a positive and significant improvement to his organisation.

03

During the IFRS transition, the

management and the audit committee, who were supported by the auditors, had a stand-off about some accounting treatments. It was resolved by the management reluctantly following the audit committee’s ruling.

It is important to be distant and persistent when dealing with the management.

04

A fellow director sold shares under conditions prohibited by the insider trading regulations. The audit

committee resolved the situation with the authority and the company avoided sanction.

The audit committee played an important role in mitigating litigious risks for the company.

05

The company operated in a unique industry. The auditors’ high turnover made the audit committee members become the ‘trainers’ of new audit staff.

The financial accounting expertise is important to his audit committee for a ‘frustrating’ reason.

06

He, as an audit committee chairperson, successfully persuaded his managing director to establish a formal internal audit function.

The audit committee member’s (or chairperson’s) persistence had improved the company’s operation.

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Interviewee Anecdote ‘Valuing’ interpretation

09

The CFO’s capability affected her workload as an audit committee chairperson. She was relied on (‘an awful lot’ in terms of arranging internal auditing related matters.

Financial accounting expertise is important to his audit committee for a ‘frustrating’ reason.

13

The newly implemented IFRS created difficulties in his judgement. He had to ‘pioneer’ an approach for accounting disclosures which he believed to be true and fair. The auditors only reluctantly accepted this treatment.

Financial accounting expertise is important to his audit committee in a ‘pioneer’ fashion.

18

The board of directors did not accept but revised the audit committee’s proposal on the level of dividends that should be distributed.

Recommending dividends should not be regarded as a duty of audit

committees if the board is not prepared to accept the level of dividends proposed by the audit committee.

The anecdotal accounts displayed in Table 6-16 were not documented in the existing audit committee literature. On the one hand, these extend the body of knowledge of what was actually carried out in audit committees. Furthermore, these types of activities could not be resolved only with audit committee meetings. On the other hand, most of these anecdotes to some extent interfered with the operation of the organisations, although they are supposed to remain independent and do not have executive power. In contrast to Turley and Zaman (2007), who suggested that audit committees were substantially influenced through the power bargaining between the management and the auditors, this research provided further evidence on the influence of audit committees.

However, this research argues that instead of the management or the auditors utilising the audit committees to exercise influence, it is the other way around – with audit committee

members actively promoting a certain outcome. It was the auditors or the management who were intentively utilised by audit committee members to execute plans or as a supporting partner for their influence.

In the next section, ‘willing’ accounts will be discussed to explain how interviewees transfer their beliefs and values into future actions. Willing to do or not to do something can be regarded as an intended realisation of ‘believing’ and ‘valuing’ in the future.

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