The Audit Committee Effectiveness: An Empirical Work on Turkish Financial Industry

Abstract

The major aim of this empirical work is to examine Audit Committee Effectiveness (ACE) from the perspective of financial institutions listed at Borsa Istanbul (BIST) and regulated by Banking Regulation and Supervision Agency (BRSA). A questionnaire is designed by using the Likert Scale with the principle of measuring attitudes by asking the professionals working in the board of directors, audit committees, risk committees, risk management, compliance units, internal audit, and/or internal control functions of financial institutions in Turkey. This questionnaire is developed to analyze their response to a series of statements about the characteristics of Audit Committee Effectiveness (ACE). Structural Equation Model (SEM) approach is used for the survey data and policy recommendations are made depending on the empirical results. The research findings reveal that the characteristics of an effective audit committee are an essential instrument for the board of directors. The empirical findings challenge key public expectations of Audit Committees, including the notion of ‘management oversight and performance evaluation’. The study highlights the potential for corporate governance in financial institutions to consider the contribution of audit committee members within the context of promoting the best corporate governance practice.