The Audit Committee System In The Corporate Governance Mechanism Study

Audit committee is an important institutional mechanism in corporate governance. Its original purpose is to have an independent financial governance power to ensure CPA's independence and integrity and realiability of financial statements provided by corporations.This mechanism includes professional qualifications,professional skills and ethic of conduct,employment,rotation,compensation,meetings and performance evaluation and so on. Audit committee has arrieved in China since 2002 when the China's Corporate Governance Principle was issued coorperately by Ministry of Finance and State Economic and Trade Comisssion. Audit committee is fresh thing in China, so many things worthwhile studying. However how to arrange the auditing committee mechanism in the insitution of China is most an important premise that will make an audit committee effectively work in the future. This study focuses on studying China's mechanism of audit committee based on the incentives of formation of audit committee in China.This study uses both empirical and normative research methods. Emperical method is used by inductive and case study, whereas normative method is used by deductive.This study mainly addresses:Chapter 1 introduces the international literature review of audit committee and the history of American audit committee.Chapter 2 descibes agency theory and its application in audit committee. This study advocates that using audit committee in corperation reduce the agency costs and ensure pareto-optimality between principals and agents.Chapter 3 using the agency theory framwork examines the financial statements in 2002 of 1214 firms listed in Shanghai and Shenzhen Stock Exchange and analyzes the incentives for formation of audit committee in China. The results indicate that formation of audit committee is not related...