Characteristics Of Audit Committee And Internal Control

Since the 21^st century,financial scandals such as Enron,WorldCom and Yinguangxiahave constantly happened,which revealed major problems in enterprises' internal control.To restore investors' confidence in the capital market,both domestic and foreign regulators legislated to improve the internal control system of listed companies.As an important part of corporate governance structure,the audit committee is very importance to the operation of internal control.Both the Sarbanes-Oxley Act of the U.S.and the Code of Corporate Governance for Listed Companies in China stipulated the membership of audit committee to ensure its independence and professionalism.However,the audit committee is only a part of the corporate governance system,the ability of audit committee to effectively supervise internal controls is also subject to other conditions and factors.Executives play an important role in corporate governance,they are at the top of companies' hierarchical structure and hold important power.For the purpose of self-interest,they are motivated to hinder audit committee's supervision function,so that they can seek rents without constraints from internal control.This paper explores the relationship between the independence and professionalism of audit committee and the quality of internal control from the perspective of executive power.Based on the principal-agent theory,information asymmetry theory,managerial power theory and rent-seeking theory,this paper selects a total of 9685 data of Shanghai and Shenzhen A shares listed companies from 2009 to 2016 as samples.Firstly,we empirically research the relationship between audit committee independence and professionalism and the internal control quality.Secondly,we empirically research the impact of executive power on the relationship between audit committee independence and professionalism and the internal control quality.Finally,we divide the executive power into 4 dimensions: structural power,ownership power,expert power and prestige power,then empirically research the impact of different dimensions of executive power on the relationship between audit committee independence and professionalism and the internal control quality.This study found that the independence and professionalism of audit committee are positively related to the quality of internal control,the more independent directors and financial experts in the audit committee,the higher the internal control quality of the company.And executive power can negativelyaffect the influence of audit committee independence and professionalism on internal control quality.To be specific,the structural and expert power can interfere with the audit committee to play the role of independence and professionalism,but the ownership and prestige power will not interfere with the audit committee to play the role of independence and professionalism.This paper enriches the research content of executive power and provides a theoretical basis and empirical evidence for the description of the influence of executive power on internal control quality.And it helps companies to strengthen the construction of the audit committee system,rationalize the power of senior management,and improve the quality of internal control.