An Empirical Study On The Governance Efficiency Of Audit Committee Of Chinese Listed Companies

Audit committee system is an important institutional arrangement of corporate governance structure, which originated in the United States and then was widely adopted in the majority of the western countries. After nearly 70 years, audit committee system has been relatively mature and perfect in the western countries. And it has played a positive and effective role in improving the quality of financial reports and the corporate governance structure. Because of the effectiveness of this system, it was formally introduced to China in 2002 and promoted in all listed companies. After more than six years, there have been more than 60 percent of listed companies which established an audit committee in China at the end of 2006 and more listed companies will adopt this system in the future. The focus of people has moved from the scales of establishment and development to the operation and effectiveness of the governance. After the foundation of this system, which influence and how much influence could it bring? After we make clear these issues, we can better examine its current situation and shortcomings in order to give suggestions for its further improvement. In this context, I study and discuss the effectiveness of Chinese audit committee system deeply, on the purpose of providing some thoughts and suggestions on the development of Chinese audit committee system.The theoretical and empirical methods are combined in this dissertation. First, theoretical study methods are used. Starting with the principal-agent theory, the principle of the Audit Committee is expounded, Based on the responsibilities of the audit committee, assumptions related to the efficiency of governance are proposed. With the empirical research methods, we build the regression models to get the empirical conclusions. Both of the methods are integrated and added each other.Based on the listed companies in the Shanghai and Shenzhen exchanges in 2006, this paper research the governance efficiency of the audit committee from the quality of financial reporting, audit opinion, audit costs and the choice of the internal auditors. The results are following: comparing with the company which has not established an audit committee, the company which has established the one can provide a higher quality financial reports, get standard audit opinions and choose the bigger accounting firms. There are no relevant conclusions about audit fee. About the internal characteristics, there was significant difference between the Board's size and the audit opinions, the number of meetings and the quality of the financial report, the number of meetings and audit opinions, the financial experts and audit opinions, the financial experts and the choice of auditor, the independent leader with financial background and the quality of the financial report, the independent leader with financial background and the audit fee.With empirical studies, the audit committee in our country has played a certain part .At the same time, because of a relatively short time of the development, the audit committees are focusing on the quality of financial reports and has not played in every areas. The independent directors and the financial experts have not played their due roles. The Audit Committee should play more roles in more areas that are development direction in China in the coming years.