Determinants of Board of Statutory Auditor and Internal Control Committee Diligence: A Comparison Between Audit Committee and the Corresponding Italian Committees

Abstract

The literature and many national regulatory frameworks have underlined the importance of audit committees as monitoring mechanisms. In the prevailing Italian firms' corporate governance system, there is no audit committee. Instead, its functions are responsibility of two different committees. One is the Internal Control Committee and the other the Board of Statutory Auditors. In this article, we try to understand whether the determinants of Audit Committee diligence, analyzed by the literature, affect both Internal Control Committee and Board of Statutory Auditor diligence in the firms listed on the Italian stock exchange over a three-year period (2005–2007).Regression analysis results show a lack of relation between Internal Control Committee diligence and the percentage of outsiders in the board, the percentage of independent directors in the board, CEO duality, and presence of blockholders. The results show that the board of director diligence has a positive effect on Internal Control Committee diligence.With regard to Board of Statutory Auditors, data show a lack of relation between its diligence and the percentage of outside directors in the board, CEO duality, and presence of blockholders. Data show a positive and significant relation between Board of Statutory Auditor diligence and both percentage of independent directors in the board and diligence of board of directors.