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Ceremonies of Governance: Perspectives on the Role of the Audit Committee

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  • Laura Spira

Abstract

The widespread establishment of auditcommittees in large UK companies cannot be explainedby evidence of their effectiveness as a mechanism ofcorporate governance, since such evidence is sparse.In this paper, participants' accounts of auditcommittee activity are explored, using conceptsdeveloped in actor-network theory. The paper suggeststhat a possible explanation for the popularity ofaudit committees may be found in their ceremonialfunction, which, through a comforting display ofconcern for corporate governance standards, validatescompany legitimacy and enables access to resources forsurvival and growth. The paper briefly reviews the literature on auditcommittee effectiveness, noting its limitations, anddescribes a qualitative study of audit committeeactivity through the perceptions of participants –audit committee chairs and members, finance directors,internal and external auditors. The actor-networkconcept of `translation' is used to frame theseperceptions, highlighting the ceremonial components ofaudit committee meetings and the performance ofquestioning. It is argued that, aside from anysubstantive audit committee activity, this ceremonialperformance plays an important part in offeringcomfort and reassurance to investors and lenders. Copyright Kluwer Academic Publishers 1999

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  • Laura Spira, 1999. "Ceremonies of Governance: Perspectives on the Role of the Audit Committee," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 3(3), pages 231-260, September.
    • Handle: RePEc:kap:jmgtgv:v:3:y:1999:i:3:p:231-260
    DOI: 10.1023/A:1009926203363
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    References listed on IDEAS

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    1. G. Sarens & I. De Beelde, 2006. "Internal audit: the expert in providing comfort to the audit committee. The case of risk management and internal control," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/428, Ghent University, Faculty of Economics and Business Administration.
    2. Davison, Jane, 2011. "Paratextual framing of the annual report: Liminal literary conventions and visual devices," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 22(2), pages 118-134.
    3. Z. Jun Lin & Jason Z. Xiao & Qingliang Tang, 2008. "The roles, responsibilities and characteristics of audit committee in China," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 21(5), pages 721-751, June.
    4. Sarens, Gerrit & De Beelde, Ignace & Everaert, Patricia, 2009. "Internal audit: A comfort provider to the audit committee," The British Accounting Review, Elsevier, vol. 41(2), pages 90-106.
    5. Sonda Marrakchi Chtourou & Sana Ben Hassine, 2006. "Impact de la mise en places des comités d'audit dans les banques tunisiennes," Post-Print halshs-00548104, HAL.
    6. Xie, Biao & Davidson, Wallace III & DaDalt, Peter J., 2003. "Earnings management and corporate governance: the role of the board and the audit committee," Journal of Corporate Finance, Elsevier, vol. 9(3), pages 295-316, June.
    7. Christie Hayne & Marshall Vance, 2019. "Information Intermediary or De Facto Standard Setter? Field Evidence on the Indirect and Direct Influence of Proxy Advisors," Journal of Accounting Research, Wiley Blackwell, vol. 57(4), pages 969-1011, September.
    8. Krishnan, Gopal V. & Singer, Zvi & Zhang, Jing, 2023. "Audit partner ethnicity and salient audit phenomena," Accounting, Organizations and Society, Elsevier, vol. 107(C).
    9. G. Sarens & I. De Beelde, 2006. "Interaction between internal auditors and senior management: A qualitative analysis of expectations and perceptions," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/358, Ghent University, Faculty of Economics and Business Administration.
    10. Niamh M. Brennan & Collette E. Kirwan, 2015. "Audit committees: practices, practitioners and praxis of governance," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 28(4), pages 466-493, May.
    11. G. Sarens & I. De Beelde, 2005. "Interaction between internal audit and different organisational parties: An analysis of expectations and perceptions," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/353, Ghent University, Faculty of Economics and Business Administration.
    12. Yeh, Yin-Hua & Shu, Pei-Gi & Chiang, Tsui-Lin, 2014. "Affiliation and professionalism: Alternative perspectives on decomposing the board structures of financial institutions," International Review of Economics & Finance, Elsevier, vol. 32(C), pages 159-174.
    13. Otniel Safkaur & Nunuy Nurafiah & Sugiono Paulus & Muhammad Dahlan, 2019. "Good or Bad Financial Reporting Can Cause Changes in Company Management," International Journal of Economics and Financial Issues, Econjournals, vol. 9(4), pages 250-258.
    14. Dobija Dorota, 2019. "Institutionalizing Corporate Governance Reforms in Poland: External Auditors’ Perspective," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 27(3), pages 28-54, September.
    15. C. Piot & L. Kermiche, 2009. "A quoi servent les comités d'audit ? Un regard sur la recherche empirique," Post-Print halshs-00537952, HAL.
    16. Romilda Mazzotta & Stefania Veltri, 2014. "The relationship between corporate governance and the cost of equity capital. Evidence from the Italian stock exchange," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(2), pages 419-448, May.
    17. Jane Davison, 2008. "Rhetoric, repetition, reporting and the “dot.com” era: words, pictures, intangibles," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 21(6), pages 791-826, August.
    18. Kwansagool Tengamnuay & Pamela Stapleton, 2009. "The role of the audit committee in Thailand: a mature monitoring mechanism or an evolving process?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 13(3), pages 131-161, August.
    19. Husam Aldamen & Keith Duncan & Simone Kelly & Ray McNamara & Stephan Nagel, 2012. "Audit committee characteristics and firm performance during the global financial crisis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 52(4), pages 971-1000, December.
    20. Dorota Dobija, 2015. "Exploring audit committee practices: oversight of financial reporting and external auditors in Poland," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(1), pages 113-143, February.
    21. Seemantini Pathak & Codou Samba & Mengge Li, 2021. "Audit committee diversity and financial restatements," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(3), pages 899-931, September.

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