The Relative impact of mandatory versus voluntary formation of audit committees

Yige Ma, Alan Kilgore, Sue Wright

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contribution

Abstract

Audit committees are increasingly viewed as a key element of good corporate governance. In some countries their formation is mandatory, and in others it is voluntary. In the Australian setting, only the largest listed companies are required to form an audit committee, although many smaller companies do so voluntarily. There are few regulations over smaller companies, and the operations of audit committees. In a jurisdiction which combines mandatory and voluntary regulatory regimes, this study examines the relative impact of the regimes on audit committee diligence, on corporate governance and on board decision-making. It finds that mandatory audit committees are more diligent than voluntary ones, in terms of meeting frequency, but trade-offs are made between meeting frequency and the use of a Big 4 auditor, and the board’s decision-making is not consistently better. There is evidence that voluntary audit committees are established for legitimacy.
Original languageEnglish
Title of host publication2012 AFAANZ conference
Subtitle of host publicationpapers
Place of PublicationMelbourne
PublisherAccounting and Finance Association of Australia and New Zealand
Pages1-33
Number of pages33
Publication statusPublished - 2012
EventAccounting and Finance Association of Australia and New Zealand Conference (2012) - Melbourne
Duration: 1 Jul 20124 Jul 2012

Conference

ConferenceAccounting and Finance Association of Australia and New Zealand Conference (2012)
CityMelbourne
Period1/07/124/07/12

Keywords

  • audit committee
  • corporate governance

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  • Cite this

    Ma, Y., Kilgore, A., & Wright, S. (2012). The Relative impact of mandatory versus voluntary formation of audit committees. In 2012 AFAANZ conference: papers (pp. 1-33). Melbourne: Accounting and Finance Association of Australia and New Zealand.