The roles, responsibilities and characteristics of audit committee in China

Abstract

Purpose

The purpose of this paper is to investigate the perceptions of the roles, responsibilities and basic characteristics of audit committees (ACs) in the current business environment in China, from the perspectives of investors/creditors, independent directors (AC members), company officers and auditors.

Design/methodology/approach

The study is conducted through a questionnaire survey of the four groups of stakeholders with two forms of survey instruments being distributed to randomly selected survey subjects. The data collected from the returned questionnaires are analyzed at both the aggregate and sub‐sample levels.

Findings

The study finds that various groups of stakeholders have generally accepted the ceremonial roles and responsibilities of ACs in terms of lifting the image of good corporate governance, enhancing communication between board of directors (BoD) and auditors, and mediating conflict between management and auditors. However, the more concrete AC oversight roles and responsibilities for improving internal control, rules compliance, sound corporate financial reporting and auditing processes have not been fully recognized at present, particularly by company management and independent directors. In addition, the study reveals that actual AC operations in practice are ineffective even though a large portion of Chinese listed companies have set up ACs.

Originality/value

The paper should assist readers to understand the recent development of corporate governance and stock market reforms in China and generate some policy implications that can be applied to other countries as well, emerging economies in particular.

Citation

Jun Lin, Z., Xiao, J.Z. and Tang, Q. (2008), "The roles, responsibilities and characteristics of audit committee in China", Accounting, Auditing & Accountability Journal, Vol. 21 No. 5, pp. 721-751. https://doi.org/10.1108/09513570810872987