The Power of Political Connections: Review on the Impacts of Audit Committee and Corporate Governance

Abstract

In this paper, the study summarizes the major studies addressing on the power of political connections that have impacts on the role of audit committees and corporate governance in the companies. The question addressed by this paper is how the political connections and audit committee role may influence the corporate governance variables as reflected in audit fees and corporate governance behavior through auditor’s assessment process. This is what has been lacking in the literatures.This paper is an attempt to identify the gaps and contribute to the political connections and corporate governance literature by showing the political connection influences on audit committee especially in an economy in which the government has coercive power in the firms. In the different context, the paper provides avenue to potential research to understand firm’s agency conflicts between the majority shareholder and the management as well as political connections that providing external resources to the firms affect auditor’s decision on audit fees, audit plan and assessment process and audit opinions.