Abstract
Recent discourse on corporate failures gives prominence to the impact of weak corporate governance systems in most corporate entities, hence reasons for investors and creditors pessimism. This literature review article seeks to articulate how audit committee could strengthen corporate governance in organizations. The paper reviews the guidelines developed by the Bank of Ghana to curb the degeneration of the Banking sector in Ghana following the collapse of seven indigenous banks between 2017 and 2018. The objective of this paper is to underscore the effective functioning of audit committees as a panacea to the corporate governance weaknesses in Ghana. The paper observes that albeit the Bank of Ghana, as a regulatory body, underscored weak corporate governance systems – it failed to emphasize mechanisms for strengthening audit committees in its guidelines to regulate the sector. The paper, therefore, promotes the presence and effective functioning of the audit committees as an additional layer to strengthen the monitoring and supervisory functions within corporate bodies. It recommends that the Bank of Ghana must emphasize the establishment of audit committees as a core part of corporate governance systems of all banks to ensure that the interest of all stakeholders is protected adequately through the oversight role of the audit committees.
Highlights
There has been a persistent global outcry from both scholars and practitioners over weak institutional arrangements for the implementation of key corporate governance principles audit committees
This study demonstrates a solution to improving corporate performance and value creation and call on regulators and policy makers to emphasize the role of audit committee in attaining corporate objectives; given that, audit committees provide an additional layer for monitoring governance functions in corporate organizations
Be embraced by every corporate institution to curtail the likely occurrence of corporate scandals
Summary
There has been a persistent global outcry from both scholars and practitioners over weak institutional arrangements for the implementation of key corporate governance principles audit committees. Scholars have emphasized the importance of audit committees in monitoring the performance of the board and management, many companies have not invested much in establishing audit committees to provide the requisite checks and balances on the functions of the board (Lessambo, 2014) and this has resulted in many deviating from their value maximization objective (Crossan, 2007). Given this background, this paper articulates how the presence and effective functioning audit committee could limit irresponsible and unethical behaviour of corporate managers. The paper ends with recommendations to regulators and policymakers alike for preventing future recurrences
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