The Voluntary Formation of an Audit Committee

34 Pages Posted: 7 Jan 2012 Last revised: 15 Mar 2012

See all articles by Yige Ma

Yige Ma

affiliation not provided to SSRN

Alan Kilgore

Macquarie University

Sue Wright

University of Newcastle; Financial Research Network (FIRN)

Date Written: January 6, 2012

Abstract

Audit committees are increasingly viewed as a key element of good corporate governance. In some countries their formation is mandatory, and in others it is voluntary. In the Australian setting, only the largest listed companies are required to form an audit committee, although many smaller companies do so voluntarily. There are few regulations over smaller companies, and the operations of audit committees. In a jurisdiction which combines mandatory and voluntary regulatory regimes, this study examines the relative impact of the regimes on audit committee diligence, on corporate governance and on board decision-making. It finds that mandatory audit committees are more diligent than voluntary ones, in terms of meeting frequency, but trade-offs are made between meeting frequency and the use of a Big 4 auditor, and the board’s decision-making is not consistently better. There is evidence that voluntary audit committees are established for legitimacy.

Keywords: audit committee, corporate governance

JEL Classification: M42

Suggested Citation

Ma, Yige and Kilgore, Alan and Wright, Sue, The Voluntary Formation of an Audit Committee (January 6, 2012). 2012 Financial Markets & Corporate Governance Conference. Available at SSRN: https://ssrn.com/abstract=1980484 or http://dx.doi.org/10.2139/ssrn.1980484

Yige Ma

affiliation not provided to SSRN ( email )

Alan Kilgore

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Sue Wright (Contact Author)

University of Newcastle ( email )

University Drive
Callaghan, NSW 2308
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
206
Abstract Views
1,374
rank
153,524
PlumX Metrics