The Audit Committee: Performing Corporate Governance
Why do we need to understand audit committees? The Cadbury Committee recommended that UK companies should adopt them in response to financial scandals that have stemmed from dubious financial reporting practices. In other countries, similar commissions ha
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THE AUDIT COMMITTEE: PERFORMING CORPORATE GOVERNANCE
by
Laura F. Spira Oxford Brookes University Business School United Kingdom
KLUWER ACADEMIC PUBLISHERS NEW YORK, BOSTON, DORDRECHT, LONDON, MOSCOW
eBook ISBN: Print ISBN:
0-306-47655-X 0-7923-7649-8
©2002 Kluwer Academic Publishers New York, Boston, Dordrecht, London, Moscow Print ©2002 Kluwer Academic Publishers Dordrecht All rights reserved No part of this eBook may be reproduced or transmitted in any form or by any means, electronic, mechanical, recording, or otherwise, without written consent from the Publisher Created in the United States of America Visit Kluwer Online at: and Kluwer's eBookstore at:
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CONTENTS
1. CORPORATE GOVERNANCE AND THE AUDIT COMMITTEE
1
2. THE AUDIT COMMITTEE IN CONTEXT
9
3. A STORY ABOUT COLLECTING STORIES
33
4. NOTES ON THE THEORY OF ACTOR-NETWORKS
55
5. THE AUDIT COMMITTEE MEETING: A PRIVATE PERFORMANCE FOR A PUBLIC AUDIENCE
69
6. THE CEREMONIAL COMPONENTS OF THE AUDIT COMMITTEE MEETING
89
7. CONTENTION AND CONSENSUS
107
8. INDEPENDENCE
127
9. COMFORT
147
10. CONCLUSION
165
NOTES
177
REFERENCES
181
INDEX
191
Chapter 1 CORPORATE GOVERNANCE AND THE AUDIT COMMITTEE
‘You want to know about our audit committee? Well, our deputy chairman says it’s a complete waste of time because none of the members know enough about the company to make any useful contribution and they don’t know what the audit committee is meant to do anyway…no, I don’t agree with him…well, come to lunch and we’ll tell you..’ The flurry of comment after the publication of the report of the Cadbury Committee on the Financial Aspects of Corporate Governance in 1992 suggested that research in this area might be of considerable interest. Since audit committees appeared to play a significant role in the Cadbury prescription for corporate governance improvement, I began to read about them. I accumulated a pile of relevant books, pamphlets and papers but as the pile grew, the idea of exploring it became less appealing. Much more interesting to find out about audit committees from the people who sat on them. A telephone call to a finance director friend elicited the response quoted above. The lunch was good and the contrast in views expressed about the value of audit committees was intriguing: the first ideas for this study were born. A sub-committee of the board of directors, the audit committee is charged with matters relating to financial reporting and audit, the mechanisms through which the board is held accountable to shareholders, Structures and processes to ensure accountability have been examined in detail in corporate governance research but scant attention has been paid to the people involved in the everyday practice of corporate governance. This study explores the activities of the audit committee from the perspectives of the individuals involved, highlighting the dynamics of their relationships and offering different insights into the role which the audit committee plays.
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