The Effect Of Audit Committee On The Quality Of Independent Audit: Evidence From Chinese Listed Companies

As an important system to perfact the corporate governance structure ,audit committee plays a positive role in perfecting corporate governance structure,improving the quality of extrnal audit and protect the investors'benefit. Many scholars have always focused on the problem whether the audit committee can improve the quality of the independent audit with the development of the listed company's audit committee in China.Based on a review of studies all over the world , firstly, the paper elaborates the theory related to audit committee system and external audit , it also studies the establishment and characteristics of audit committee and their influences on the quality of independent audit. This theoretical analysis illustrates that ,audit committee standardizes management's conducts by supervising and controlling the process of making the financial information; it improves the quality of external audit and perfects the corporate governance structure by communicating with manage- -ment ,internal audit department and certificated public accountants. Then, the paper empirically examines the establishment and characeristics of audit committee and their influence on the quality of external audit by using the relevant data from Chinese listed companies, also using earnings management degree and audit opinion type as substitute variables of the external audit quality. The research results indicates that audit committee indeed improve the quality of the external audit and to some extent the audit committee characteristics, such as independence, professional ability, authority and size , have a positive effect on the quality of the external audit .It means that audit committee system in China does have taken certain responsibilities as it is expected, but its due function is still not brought into effect completely. Finally, the paper gives some construction suggestions in order to improve the effectiveness of Chinese audit committee system.