A Study On The Efficiency Of Audit Committee Of Chinese Listed Companies

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 reliability of financial statements provided by corporations. This mechanism includes professional qualifications,professional skills and employment,rotation,compensation,meetings and performance evaluation and so on. Audit committee has arrived in China since 2002 when the China's Corporate Governance Principle was issued corporately by Ministry of Finance and State Economic and Trade Commission. Audit committee is fresh thing in China, so many things worthwhile studying. However how to arrange the auditing committee mechanism in the institution of China is most an important premise that will make an audit committee effectively work in the future.The author hopes the essay can be a contribution to study of audit committee in china.The main sections are follow:Chapter 1: in this section, the author introduces the international and domestic literature review of audit committeeChapter2: the author probes into research on the audit committee system building theory. In the section, there is a brief introduce of the system of Audit Committee in foreign countries. The author introduces the historical development of the system of Audit Committee in the Unites States in particular details. Then he also compares four models of audit committee system.Chapter 3: it is the important section. Since the audit committees play the roles of supervising, leading and integrating functions, their interactions with the management, internal audit and external CPA are very important. This chapter studies the composition, meetings of the audit committees, and relationship with internal audit,external CPA and management.①The composition of the committees: It was suggested that non-executive directors to be placed in the committees initially, and then the suggestion changed to external directors. This section discusses the composition of the committees, including the members' basic requirements, independence, terms and sizes. The independence factor is the main concentration here. It indicates what kind of people is suitable to be placed in the committees, and proves the independence factor is the prerequisite to the success of the committees.②Committee meetings: The audit committee is not a day-to-day operation unit; it substitutes the account responsibilities of the board of directors to the general shareholders. Whether the committee meetings may be held effectively affects the fulfillment of the financial governance functions and activities, and the release of their account responsibilities. This section analyzes the frequency and duration, and the attendee of the meetings.③The relationship between the audit committee and the internal audit, external CPA, and the management: In order to fulfill the responsibility, the committee should rely on the other three to complete its duties. However, the committee should also act as a protection to the internal audit and external CPA, as they are often influenced by the management and greatly reduce the supporting effect to the committee. The independence of the committee, discussed in the previous chapter, is very important. If the independence of the committee is not present, the protection to the internal audit and external CPA cannot be properly provided. In the interaction with the management, it generates a contradiction relationship of supervising and cooperation. Therefore, it is necessary to properly evaluate any information provided by the management, and search the opinions of the internal audit and CPA to reach a balanced conclusion.Chapter4: it is the most important section. It is an empirical study. This section carries out a systematic study on the governance efficiency of Chinese audit committee according to the investigation of china listed companies. The results indicates :①Chinese audit committee plays a role and takes significant function on information disclosure.②Chinese audit committee aren't take significant function on communication.③Specialty of audit committee isn't restrictive to earnings management and don't play a role on communication. Other characteristics are not significantly related to the quality of earnings management and audit opinion. So, audit committee institution has not elaborated its function in China.chapter5:The reasons which cause the problems are various, for instance, the idea of the listed companies to establish the system of audit committee is absent; Independent director system exists question; audit committee system and board of supervisors system exist conflicts and so on. Profits from other national advanced experience, based our country national condition, it may solve the problems from the below angles: First, strengthen the idea of listed companies to establish the modem corporation governance; Twice, Guarantee the independent character of audit committee; Third, improve quality of members of audit committee; Fourth, perfect incentive and constraint mechanism of audit committee members. Distinguishing feature and limitationThe textual distinguishing feature is that this essay is not only focuses on supervisor function of audit committee, but focuses on its communication function.Limitation: because it is difficult to collect resource which we need, it may affect the accuracy of investigation results.