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The Audit Committee and its importance - Literature review Example

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The Audit Committee and its importance

The aim of this essay has been thus concentrated on reviewing selected literatures based on the importance of audit committee in the modern day business context, working as a monitor as well as a guarantor of viability in corporate financial reporting. The ultimate objective of the essay will further emphasise the power held by audit committee to affect the corporate financial operations following critical evaluation of secondary evidences. Discussion Historical Background Gendron & Be?dard (2006) revealed that it is owing to this rising pressure that organisations are driven towards maintaining transparency at every level of the managerial processes. Correspondingly, as financials hold considerable importance in managerial processes, the influence of audit committee also expands to a substantial extent. Drawing from this inference made by Gendron & Be?dard (2006), it can be affirmed that comparative to the traditional business contexts, competition and influences of external forces have increased in manifolds in the 21st century. These external forces, such as rising competition, globalisation, changing customers’ behaviour and governmental interventions further increase pressure on the organisation to perform and sustain in the industry. Emphasising the significance of audit committees, Cohen & et. al. (2002) further revealed that corporate governance, as a regulatory body of modern organisations, also imposes substantial impacts on the audit process’ significances and correspondingly on audit committees’ functioning. Notably, corporate governance itself is a modern concept of effective organisational management. Therefore, correlating the supervisory functions of corporate governance with the growing significance of auditing and audit committees shall be deemed rationale, when justifying the post modern advancements of corporate financial performances in comparison to the traditional forms. Considering these aspects, audit committees have been argued as a mosaic of corporate governance by Cohen & et. al. (2002), acting as the segment responsible for deterring fraud in the process of ensuring effective financial reporting. Making critical evaluations based on this presumption, Turley & Zaman (2007) revealed that the audit committees’ influences work stronger and more apparent outside the formal system followed when operating in alliance with corporate governance participants in an organisation. Turley & Zaman (2007) further argues that audit committees can be used for positive as well as negative intentions to gain governance control through political incentives within the organisation apart from applying its functions to raise transparency in the corporate reporting procedure. Based on the study of Turley & Zaman (2007), it can thus be inferred that on a positive note, audit committees may pressurise corporate participants to maintain transparency, but from a negative viewpoint, it also acts as a tool to obtain greater power in the authoritative construction of the organisation. However, in either ways, audit committee is signified to hold considerable power in influencing the overall organisational effectiveness. Methodologies Cohen & et. al., (2002) initiated an ...Show more


The Audit Committee and Its Importance Table of Contents Table of Contents 2 Introduction 3 Discussion 3 Historical Background 3 Methodologies 5 Previous Studies on the Topic 6 Mainstream versus Alternative Viewpoints 7 Principle Questions Being Asked 8 General Conclusions that are being Drawn 9 Conclusion 9 References 10 Introduction Purposefully, structured audit committees have been set up in modern organisations, which are bestowed with the responsibility to audit the internal as well as external financial transactions conducted by the company…
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The Audit Committee and its importance essay example
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