Abstract
The audit committee is one of the parts of corporate governance mechanism, which is understood as the relationship between corporate managers, directors and the providers of equity, people and institutions who save and invest their capital to earn the return. This study presents survey research results of audit committee activity in Polish public stock companies quoted on the Warsaw Stock Exchange (WSE). The purpose of this paper is to present the audit committee practice in Poland after 2009. The paper shows that the audit committee practice is still the most problematic issue of transitional Polish corporate governance rules. The survey has shown that the corporate needs and its implementation, and communication with listed companies leave a lot of room for improvement. The paper is based on the documents prepared in 2010 by PricewaterhouseCoopers, the Polish Association of Listed Companies and the Polish Institute of Directors.
Highlights
Researches have defined audit committees in a variety of ways
It is widely believed that good corporate governance rules and audit committee practice are an important factor in improving effectiveness of the companies, especially in developing countries and during the period of the global economic crisis
Dissatisfied members would like to have more time for documents analysis rather than for direct meetings. Good comparison in this subject is looking at experience of audit committees of stock companies quoted on the London Stock Exchange (LSE)
Summary
Researches have defined audit committees in a variety of ways. According to Cadbury (1992), audit committee is a formal institution used by corporate owners to discipline organisations. The audit committee serves many important corporate governance functions and provides advice on operational and regulatory matters (Menon, Williams 1994) It helps to alleviate agency problems by facilitating the timely release of unbiased accounting information by managers to shareholders, creditors, reducing information asymmetry between insiders and outsiders (Klein 1998). The composition of the audit committee is an important governance mechanism because the presence of outside directors provides a way of monitoring the actions of managers and of ensuring that shareholder interests are being safeguarded. De Fond et al (2005) find that positive market reactions to the appointment of a financial expert to the audit committee occur only when the director has accounting-related expertise and only when the appointing firm has relatively strong corporate governance. 10. Coates et al (2007) examine changes in financial literacy of audit committees and find that companies that improved their apparent financial literacy of the audit committee had higher stock returns than those which did not
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