Analysis Of The Relationship Between Audit Committee Characteristics And Internal Control Deficiencies

In2008, China has promulgated the Basic Norm of Enterprise Internal Control and in2012, China has promulgated The Supporting Guidelines of Enterprise Internal Control.This two legislations emphasized the importance of internal control and internal control information disclosure and improved the requirements of the internal control information disclosure. At the same time, the legislations also definitized the constitution and the responsibility of the audit committeeWith the transition from voluntary disclosure internal control information to mandatory disclosure, the establishment and development of the internal control system caused widespread attention again. As an important part of the corporate governance, audit committee will plays a role on establishing and perfecting the internal control system.This paper summarized the literature which related to audit committee characteristics and internal control deficiencies and based on the principal-agent theory and the asymmetric information theory by building a binary Logit model. Besides, this paper used Shanghai and Shenzhen A-share listed companies on2012-2013as samples. This paper analyzed the relationship between the size of audit committee, professionalism, independence and internal control deficiencies empirical research.The results indicated that the size of the audit committee is positively related to internal control deficiencies. But this relationship is not obvious.The main reason is that the audit committee system in China is incomplete, the disclosure of information is not standard.This problem needs to be more specifically and comprehensively considered.Audit committee professional, that is, the audit committee members who have financial expertise in the ratio of the total number of members is significantly related to the internal control deficiencies. Besides,this relationship is negative.This result proved that the stronger the audit committee professional is,the less the possibility of internal control deficiencies will be.The independence of the audit committee, that is, the proportion of independent directors in audit committee member is significantly correlation with internal control deficiencies.Moreover,this relationship is negative. The result of a further research indicated that there is a significant negative correlation between independence of the audit committee and severity of the internal control deficiencies, but there is no such correlation between the size or professional of the audit committee and severity of internal control deficiencies.According to the theory and empirical research conclusions, this paper provided useful suggestions for improving the audit committee system and the internal control information disclosure system, etc. This paper provided empirical evidence to relevant researches, and also enriches relevant researches.