Spotlight on the Design of European Audit Committees: A Comparative Descriptive Study

Abstract

In this study we shed light on the design of audit committees in continental Europe by analysing the contents of the Eighth EU Company Law Directive, European codes of governance, and corporate audit committee charters. Our results show substantial cross‐national differences in the scope of responsibilities to be addressed by audit committees, in the competences required of committee members, and the proportion of independent committee members. The extent of differentiation comes as a surprise in light of prevailing pressures for isomorphism in the design of audit committees. A closer analysis of publicly available audit committee charters shows that compulsory disclosure requirements can increase the effectiveness of coercive isomorphism, but, consistent with prior literature, can also increase the percentage of unoriginal content in corporate documents. Our results contribute to the scant knowledge about audit committees outside the Anglo‐Saxon domain and inform practice about implementing audit committee design standards in the EU.

Corporate Governance Codes: A Review and Research Agenda

“…Third, some studies have contributed to enrich the comparative analysis of the content of codes (Cicon et al, 2012), and have devoted attention to analyze the differences in the definition of director independence across national codes (Zattoni & Cuomo, 2010). Fourth, recent studies have started to investigate the consequences of codes issued by transnational institutions in the EU (Böhm et al, 2013;Cicon et al, 2012). Finally, some papers have investigated how firm compliance/noncompliance evolves over time (Arcot et al, 2010;Chen & Nowland, 2011) and have provided richer empirical evidence on the explanations for deviations from a corporate governance code (Hooghiemstra, 2012;Shrives & Brennan, 2015).…”

Fighting Corruption by Means of Effective Internal Audit Function: Evidence from the Ghanaian Public Sector

“…In the transition economies, studies provide evidence that firms with good corporate governance structures and systems, such as the presence of a board of directors, are more likely to have an internal audit function (see Goodwin & Kent, ). A limitation of such studies is that they simply attempt to predict the existence of an internal audit unit and do not examine the number of staff, budget, qualifications, strategic focus and its independence – likely predictors of audit quality or internal audit effectiveness (Carey, Craswell & Simnett, ; Carcello, Hermanson & Raghunandan, ; Böhm et al , ). In explaining the importance of internal audit in institutions, for example, Van Gansberghe () stated that internal audit effectiveness is measured by the extent to which it contributes to effective and efficient service delivery, as this drives the demand for improved internal audit services.…”

“…In recent literature, the presence and composition of the audit committee play a critical role in the IAE. The audit committee charter, the governance structure and the composition of the audit committee are equally important, as the responsibilities of audit committee may include the review of the qualifications, organization, strategic focus and resourcing of internal audit as well as the addressing of the effectiveness of the company's internal control system (Böhm et al , ). Internal auditors are seen as central forces in uncovering or limiting misappropriation of assets and corruption schemes (Halbouni, ).…”

Boundary spanning and gatekeeping roles of UK audit committees

“…From a thematic analysis of governance codes in 23 EU countries, they find that some EU countries are diverging from the UK model. Böhm et al (2012) …”