The Governance Role of Audit Committees: Reviewing a Decade of Evidence

Abstract

Even though audit committees have traditionally been a key component of corporate governance regulation, the last decade has witnessed a greater emphasis on audit committee regulation and a parallel intensification of academic research on the subject. This review synthesizes recent empirical research seeking to investigate various aspects of audit committees’ governance role. The review is structured around current regulatory expectations of audit committees seeking to document the extent to which specific characteristics of good practice influence various components of audit committee effectiveness. It is found that larger and more independent audit committees as well as those with financial expertise are more likely to seek a higher level of external audit coverage and assurance. There is also evidence that more independent audit committees are associated with the purchase of lower levels of non‐audit services from auditors, thereby seeking to preserve the independence of the external audit process. There seems a consensus that more independent audit committees and those with greater accounting/financial expertise have a positive impact on the quality of financial statements. Evidence on the stock market reaction to audit committee issues suggests that investors both welcome the presence of audit committees and react positively when members are appointed with relevant expertise. It is also found that internal auditors view certain audit committee characteristics, specifically independence, expertise and frequency of meetings, as leading to more effective audit committee performance. In summary, therefore, this review documents a significant amount of evidence offering support to current regulations concerning the desired characteristics of audit committees.

Eksplorasi Elemen Integrated Reporting Dalam Annual Reports Perusahaan Di Indonesia

“…Komite Audit adalah komite pengawas di bawah dewan komisaris karena dewan komisaris dalam menjalankan tugasnya melimpahkan tanggung jawab dalam proses pelaporan perusahaan kepada komite audit (Bédard & Gendron, 2010;Ghafran & O'Sullivan, 2013;Li et al, 2012). Komite audit diyakini memiliki peran dalam mengurangi asimetri informasi (Akhtaruddin & Haron, 2010;Al Daoud, Ku Ismail, & Lode, 2015) dan akibatnya mengurangi biaya agensi (Bédard & Gendron, 2010).…”

“…Komite audit diyakini memiliki peran dalam mengurangi asimetri informasi (Akhtaruddin & Haron, 2010;Al Daoud, Ku Ismail, & Lode, 2015) dan akibatnya mengurangi biaya agensi (Bédard & Gendron, 2010). Dalam konteks tata kelola perusahaan, komite audit memainkan peranan penting dalam mengawasi implementasi kebijakan keuangan dan akuntansi perusahaan (Dezoort, 1998;Ghafran & O'Sullivan, 2013;Hayes, 2014;Spira, 1998Spira, , 1999. Oleh karena itu luas lingkup integrated reporting juga tidak dapat dilepaskan dari peran audit komite.…”

Review of the literature on board committees: taking stock and looking ahead

“…Since the mid-1990s, board committees have become an inextricable element of the corporate landscape and hence an object of research interest in corporate governance literature to date. There has not been a review of scholarly work on board committees as yet, except for Ghafran and O'Sullivan (2013), who have scrutinised papers on audit committees for a period of only ten years. We, in turn, looked at the three main board committees of audit, compensation and nomination over a period of almost a quarter of a century.…”

“…They may also examine a different timespan than the one we have chosen and establish different patterns and trends, such as Ghafran and O'Sullivan (2013), for the decade of work on audit committees. Review work on particular committees, rather than all three of them together, would be advantageous in disentangling the intricacies of their functioning in more detail than is the case in this paper.…”

Espousal of combined assurance model in South Africa’s public sector

“…Nonetheless, consistent with agency theoretic viewpoint of monitoring they found that high quality auditors, and, to some extent, leverage have a positive association with audit committee activity (Collier & Gregory, 1999). Ghafran & O'Sullivan (2013) found that audit committees with financial expertise are more likely to seek a higher level of external audit coverage and assurance.…”