FAR Literature Review & Practice Note: Audit Committee Involvement and Audit Quality

The audit committee is a key feature of contemporary corporate governance. Despite evertightening regulation concerning its independence and expertise, it still is unclear why some audit committees underperform, and how this impacts the effectiveness of the external audit. The researchers argue that, next to having the appropriate skills, audit committee involvement in the audit process is crucial for its effectiveness. Communication, trust, and support between the audit committee and the external auditor, as well as the power and leadership of the audit committee are key features which may affect how the audit committee deals with disagreements between management and the auditor, and to what extent it will critically challenge both parties. However, these “soft” dimensions are understudied, and more insight is valuable for practitioners, academics, as well as regulators on what triggers audit committee involvement, and how this feeds back into the audit process. The researchers aim to demonstrate that an active, involved audit committee is able to create synergies with the external auditor, which can streamline the audit process and enhance audit quality

To read the literature review, click here.

To read the practice note, click here.