A Study On The Audit Committee Effectiveness

In 2002, Securities and Exchange Commission of China consociation with theoriginal national economic trade committee released the public corporate governancestandards, which provide: "the public company board can establish specializedcommittees in strategy, audit, nominate, salary, check etc.. according to the relevantresolution of the shareholders' meeting ". Whether do these voluntarily establishedaudits committees come to a expectation result in corporate governance? This is theproblem which will be discussed in the paper.The study begins with agent theories and information dissymmetry theories,analyzes the causes of established audit committee and it's function in promoting thequality of accounting information. Then discusses the conditions which auditcommittee function effectively from the interior and external environment, and putsforward an evaluation system of audit committee's effectiveness from perfectingcorporate governance structure and improving the quality of accounting information.We also make an empirical relevant study from the visual view of earningmanagement, which is one of the most means of the quality of influential accountinginformation.Based on empirical study, this paper prove whether the established auditcommittees lower the degree of earning management and attain to an the purpose ofimprovement the quality of accounting information, and then the relationship betweenaudit committee and earning management. The empirical study verified that theestablishment of audit committee can lower the earning management significantly.The coefficient of regression between independent board and earning management isnegatively significant; coefficient of regression between the scale the of the auditcommittee ands earning management show negative correlation to a certain extentalthough it is not significant, the coefficient of regression of the accountingprofessionals and earning management is not only not significant but also contradictwith our expectation.