Empirical Research On Establishment And Effectiveness Of Audit Committee Of Listed Corporations

Audit committee, as an important institutional mechanism in western corporate governance, aims to found an independent finance governance power in the board to enhance the independence of CPA and strengthen the reliability and credibility of finance reports. According to the international experience, audit committee plays a positive role in improving the quality of finance information and protecting the investors' benefit. In the flounce of the worldwide audit committee, Securities and Exchange Commission of China consociation with the original national economic trade committee issued the Listed Corporation Governance Standards in January of 2002, which said: the listed corporation board can set up specialized committees in strategy, audit, nominate, salary, check ete...according to the relevant resolution of the share holders' meeting. Then audit committee system began to establish in China. However, there are many environmental differences in economic sense between China and West Country. In China, ownership structure of the listed corporation is voluntary. Based on the characteristics of listed corporations in china, this paper focuses on the factors which influent the formation and the effectiveness of audit committee.This paper first introduces the research background and significance, the research about audit committee at home and abroad. Then, introduces the concept, the nature, functions, and different setting ways of audit committee. And then, analyzes the factors which influent audit committee formation and its effectiveness. This paper can be divided into two parts in the empirical study. In the first part, we choose 2435 Chinese listed corporations from Shanghai and Shenzhen Stock Exchange Market from2002 to 2003. Based on the corporate governance, ownership structure, finance state, the first part investigates the factors which influent audit committee formation in listed corporations. The results indicate that independent directors, the board meetings, the company size and earnings per share are significantly positively related to the voluntary audit committee's formation, and board size, Z index are negatively related to the dependent variable.The second part focuses on the effectiveness of audit committee of listed corporations in Chinese stock market. Using single-variable and multi-variable analysis of the statistical analysis methodology, this part carries out the empirical test to the oversight and communication functions of audit committee. The empirical results show that: the establishment of audit committee is negatively related to the financial reporting fraud, but has no significant effect on the type of audit opinions. The audit committee in the implementation process only plays partial functions.