The Relative Impact of Mandatory versus Voluntary Formation of Audit Committees

35 Pages Posted: 19 Jan 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 10, 2012


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

Suggested Citation

Ma, Yige and Kilgore, Alan and Wright, Sue, The Relative Impact of Mandatory versus Voluntary Formation of Audit Committees (January 10, 2012). CAAA Annual Conference 2012. Available at SSRN: or

Yige Ma

affiliation not provided to SSRN ( email )

Alan Kilgore

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109

Sue Wright (Contact Author)

University of Newcastle ( email )

University Drive
Callaghan, NSW 2308

Financial Research Network (FIRN) ( email )

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

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