Exploring audit committee practices: oversight of financial reporting and external auditors in Poland
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Exploring audit committee practices: oversight of financial reporting and external auditors in Poland Dorota Dobija
The Author(s) 2013. This article is published with open access at Springerlink.com
Abstract This paper investigates audit committee (AC) practices in relation to the oversight of financial reporting and external auditors. We conducted semi-structured interviews of Polish public interest entities to explore AC processes in a different environment from the widely researched Anglo-American model of corporate governance. The results of the study highlight the complexity and contradictory nature of solving governance issues in an environment characterized by a high concentration of ownership. Monitoring is stronger for companies whose dominant shareholder is a foreign investor. Local firms are generally slower to embrace an AC as an effective tool of oversight for financial reporting and external auditors. In general, the processes utilized by ACs are similar to those reported in the literature. The collected evidence does not provide support for a single dominant theory that explains the actual practices of ACs. In fact, multivocality proves to be a more useful approach for explaining various aspects of AC practices. Keywords Corporate governance Audit committees Financial reporting Auditors Poland
1 Introduction The audit committee (AC) plays an important role in corporate governance. Because of the separation of corporate management and ownership, supervisory boards protect shareholders’ interests because managers may not always act in the best interest of shareholders (Fama 1980; Fama and Jensen 1983; Jensen and Meckling 1976). Thus, the goal of the board of directors/supervisory board is to oversee management activities. Because of the diverse responsibilities of a board of D. Dobija (&) Kozminski University, ul. Jagiellonska 57/59, 03-301 Warsaw, Poland e-mail: [email protected]
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directors/supervisory board, some of its oversight responsibilities must be delegated to various committees. The role of an AC is to oversee financial reporting, internal control, external auditors, and business risks. The importance of ACs has recently been emphasized after a series of financial scandals at the turn of the century, with Enron as the most spectacular. ACs have attracted increasing attention from regulators, practitioners, and researchers. A number of accounting firms and practitioners have advocated approaches and guidelines for more effective ACs (KPMG 2004). A number of these recommendations have been incorporated into well-known laws and regulations, such as the Sarbanes–Oxley Act (SOX) in the United States (US) and the Combined Code in the United Kingdom (UK). Regulators have assigned various duties to auditing committees, including the oversight of financial reporting and external auditors. These two duties are considered important factors in ensuring both the integrity of financial reporting and the ability of financial consumers to make informed decisions. At the Eu
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