| In recent years, domestic and international financial fraud have happened frequently, investor confidence drop sharply. In order to enhance the external auditors’ independence and improve corporate governance, in2002, CSRS and related department issued The Listed Companies’ Governance Detailed Rules, which require Board of listed companies to set up Audit Committee voluntarily. Then Audit Committee system established in China gradually. The role of Audit Committee is to improve the quality of financial report and audit quality, and examine the internal control and external audit. As Audit Committee has come into our country recently, domestic research is just a few, and empirical study is even less. In our country, market circumstance, economic condition and listed companies all have their own characters. So, abroad study isn’t suitable to our country. This article carries out empirical research to study the impact of Audit Committee on the audit quality.In this study, we choose the listed companies from Shanghai Stock Exchange Market and Shenzhen Stock Exchange Market as our research samples. We deleted many companies not satisfying our selected condition, and then we finally get1708listed companies from2007to2009as our samples.We study Audit Committee from the independence, professionalism and diligence three aspects. Independence measured by "The total number of members of the Audit Committee" and" The proportion of independent directors in the Audit Committee". Professionalism evaluated by "Whether the Audit Committee leaders is financial expert" and "The proportion of financial expert in the Audit Committee", Diligence measured by "The Audit Committee meetings". Audit quality is measured by the absolute value of accruals profits.In the empirical research, firstly, we do descriptive statistics about the independent variables, and then we do the Pearson correlations between dependent and independent variables. Finally a liner regression equation is established to test the impact of the Audit Committee on the audit quality.According to the study, we find Audit Committee is significantly positively related to the audit quality. The study leads to the following conclusion:(1) From the perspective of independence,"The total number of members of the Audit Committee" will have a significant impact and improve the audit quality. But we don’t find the proportion of independent directors will affect the audit quality.(2)From the professional point of view,"whether the Audit Committee leaders is financial expert" significantly affect audit quality, but "The proportion of financial experts" did not play a significant role, indicating the role of leaders is significantly larger than the role of ordinary members.(3)From the diligence perspective,"The Audit Committee meetings" can significantly improve audit quality. We can see enough participation can affect the efficiency of the Audit Committee, so as to improve audit quality.(4) From control variables perspective,"Whether chairman of the board and manager is one person" negatively related to audit quality."Firm sizes","Debt ratio","The proportion of the largest shareholder" is positively correlated with audit quality. We don’t find "The return on net assets" has significant impact on audit quality.In the study we found that the overall size of the Audit Committee is relatively small, independent directors are not independent, the Audit Committee meetings is too less. Therefore, to improve the Audit Committee, the following policies will be applied:(1)Divide the function of the Audit Committee and Board of Supervisors;(2) Issue relevant laws to regulate the Audit Committee;(3) Optimize the internal Audit Committee;(4)Establish and perfect the mechanism of the Audit Committee;(5)Constraint information disclosure mechanism.According to the paper, Audit Committee actually plays the positive role in improving audit quality, but still needs further refinement to improve the corporate governance mechanism. |
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