Audit committee in corporate governance

Abstract

There is an increasing effort globally to combat fraud and malpractices in companies so as to make corporate dealings trustworthy. The effort calls for ensuring the integrity of companies' financial statements, compliance with accounting standards and legal requirements as well as institutionalizing of qualitative and effective internal control and risk management policies. To achieve all of these, law and policy in leading and emerging markets require every public company to intermediate the relationship between the auditors and management of audited companies by setting up an audit committee or its equivalent with clearly defined facilitative functions. This article evaluates the conceptual basis for composition, duties, rights and ethics of audit committees to determine the latter's suitability to contemporary and emerging challenges, considering that auditing is a professional engagement with legal and professional ethics implication. It does so with a view to recommending a framework that will not make the committees exist merely as another layer of ineffective bureaucracy. From a transatlantic to global survey, it rests on the Nigerian situation. In Nigeria, the present appraisal finds a contemporarily weak, as well as purposed to achieve independence and balance of power audit committee. That committee is recyclable yearly through a democratic system that is prone to making subjective and wrong choices in the absence of comprehensive regulatory guidelines. That committee has an open-ended mandate, and is required to serve gratuitously, subject to no liability for shirking. It is submitted that the committee, as presently constituted and mandated, is unsuitable to the emerging functions of audit committees. In the light of this finding, this article submits a ways out of the current global corporate failures arising from unethical and totally criminal financial statements' manipulation, as well as weak internal controls over regulatory compliance. That path begins with a paradigm shift in the need for composition, role, duties, rights and liability of audit committees.