The Research On Audit Committee Based On The Demand Of The Corporate Governance

As an important part of corporate governance in UK and America, audit committee could prevent financial fraud in a way and help the board to remove its legal liabilities, which has been supported by empirical studies. In China's emerging security market, the financial swindle have been perplexing investors and supervisors. As a result, China Securitities Regulatory Commission (CSRC) expects the introduction of independent director and audit committee help to perfect corporate governance and promote standardized operation of listed companies. In order to provide the establishment and perfection of audit committee in china with practical suggestion, this paper analyzes the necessity, effectiveness and responsibility structure of audit committee in China.Firstly, beginning with the evolution of audit committee, this paper suggests that audit committee be an institutional arrangement for the board to supervise the financial report. Secondly, based on the current situation of China's corporate governance, this paper analyzes the necessity of audit committee in the listed companies. On one hand, corporate governance theory and game theory are replied to analyze the necessity. On the other hand, the strengthening of the board's supervision and the remedying of the lack of the board of supervisors made the audit committee necessary. This paper emphasizes that audit committee could strengthen the board's supervision on financial report provided by the managers. Thirdly, the effectiveness of audit committee in China's listed companies is tested empirically. Two models are constructed to analyze the following correlations: one is the correlation between the audit committee and audit opinion, the other is the correlation between the audit committee and the performance of corporation. The regression results show that the supervisory role of China's audit committee is not effective. Lastly, this paper re-constructs the responsibility system of audit committee, followed by the analysis of its member's legal responsibilities.