Abstract
This paper investigates audit committee (AC) practices in relation to the oversight of financial reporting and external auditors. We conducted semi-structured interviews of Polish public interest entities to explore AC processes in a different environment from the widely researched Anglo-American model of corporate governance. The results of the study highlight the complexity and contradictory nature of solving governance issues in an environment characterized by a high concentration of ownership. Monitoring is stronger for companies whose dominant shareholder is a foreign investor. Local firms are generally slower to embrace an AC as an effective tool of oversight for financial reporting and external auditors. In general, the processes utilized by ACs are similar to those reported in the literature. The collected evidence does not provide support for a single dominant theory that explains the actual practices of ACs. In fact, multivocality proves to be a more useful approach for explaining various aspects of AC practices.
Highlights
The audit committee (AC) plays an important role in corporate governance
An in-depth analysis of the AC oversight processes indicates that development of ACs and of the processes of forming relations and collaborations between ACs and external auditors remains in an early phase
Our study illustrates that the current practice has difficulties maintaining the development of corporate governance regulations, those related to ACs
Summary
The audit committee (AC) plays an important role in corporate governance. Because of the separation of corporate management and ownership, supervisory boards protect shareholders’ interests because managers may not always act in the best interest of shareholders (Fama 1980; Fama and Jensen 1983; Jensen and Meckling 1976). The goal of the board of directors/supervisory board is to oversee management activities. Because of the diverse responsibilities of a board of. D. Dobija directors/supervisory board, some of its oversight responsibilities must be delegated to various committees. The role of an AC is to oversee financial reporting, internal control, external auditors, and business risks. The importance of ACs has recently been emphasized after a series of financial scandals at the turn of the century, with Enron as the most spectacular
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