Abstract
Over the last decade or so, the focus on information disclosed in financial statements, corporate governance andthe role of the audit committee to monitor and oversee financial reporting has increased. This is largelyattributed to the global business scandals caused mainly by fraudulent financial reporting. In response, the roleof audit committee was questioned in an attempt to maintain user’s confidence in corporate financial reportingand improve the effectiveness of an adequate internal control Not least because, an audit committee is anindependent body created by the board to oversee financial reporting and disclosures, monitor effectiveness ofinternal control, and external and internal audit functions.At present, there is no conclusive evidence on the role and effectiveness of the audit committee. At one end ofthe spectrum there are audit committees that see their role as the validation of financial statements, while at theother end, are those who have broadened their role to include oversight of performance and critical high levelbusiness and operating tasks.The purpose of this research is twofold: First: to investigate the state of the art of audit committees in Bahrainregarding composition, meetings, independence and role of audit committees. Second, since “Blue Ribbon”recommendations were issued in 1999, effectiveness of audit committee has become a cornerstone for corporategovernance. Therefore, an objective will be to assess effectiveness of audit committee.
Highlights
The corporate failures that shock the business community at the turn of this century have placed corporate governance issues as a major concern for financial statement users worldwide
In this paper we investigated the state of the art regarding the role, composition and independence of the audit committees in Bahrain, using a sample of 30 listed companies on the stock exchange
Another aspect related to composition of the audit committee is financial knowledge in accounting, auditing, internal control system and financial reporting processes of its members
Summary
The corporate failures that shock the business community at the turn of this century have placed corporate governance issues as a major concern for financial statement users worldwide. The main emphasis of proper corporate governance is on such issues as the integrity of a corporation management, adequacy of controls, ability to continue as a going concern and user’s right to have reliable, transparent and timely reports about a corporation performance. Most companies around the globe are exerting more efforts to improve corporate governance in a bid to maintain the integrity of financial reporting and user confidence again. A number of other factors have played a key role in the current interest in corporate governance, such as size of corporations that is growing larger and complex, globalization that has attracted investors worldwide, and the current increasing interest in the social responsibility of corporations
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