Audit Committees: Frequency of Meetings, Quality of Meetings Documents and Corporate Governance

Abstract

The purpose of this article is to examine effectiveness of audit committees with focus on the ratio and quality of meetings. A survey was conducted in 2016 among members of the Audit Committees at Public Interest Entities. The survey provides an overview regarding the working environment of the audit committees and the opinions of the committee members. This research deals with the process of audit committees with regarding to the number of meetings, meeting documents and discussions. There has been a lack of research regarding processes of the Audit Committees. The article is a contribution to that debate. The tasks of the Audit Committees are the responsibility of the Board of Directors in accordance with the Annual Accounts Act. Boards require, inter alia, ensure that meeting documents and other information are available to committee members and presented correctly. Committee´s members are also responsible for this section in the form of calling for the necessary documents at any time, especially the Chairman. The framework and arrangement of the Audit Committees are vital for its purpose. The survey was conducted among companies and institutions that fall within the definition of “public interest entities”. Assessing the quality of meeting documents was posed three questions; whether the meeting documents comes with sufficient notice, that it is adequately presented and that critical discussions take place at meetings. The members of the Audit Committees assessed the quality themselves. The most effective numerical value to indicate the effectiveness of the audit committees is the number of meetings the committee holds. Number of meetings can influence if the committee can carry out their tasks. Therefore, variables related to numbers of audit committee meetings will be used and number of committee meetings with an external auditor. To investigate possible deviations in the quality of meeting documentation, the variables are cross-checked; the number of committee meetings, the number of meetings with the auditor and all three variables belong to the quality of the meeting documentation. Two hypotheses are presented. The findings, numbers of meetings have influence on the quality of the meetings documents regarding timing but not the number of meetings with external auditor. One of the main purposes of the Audit Committees is to ensure the quality and reliability of financial reports. This applies to the board, shareholders, and other stakeholders. The activity of meetings is of great importance. The average meetings are 5.2 per year. Each meeting therefore weighs about 20% of the relative total. Good governance is not only related to the quality of the meeting documentation and information that companies and organizations transmit, but that internal governance promotes, among other things, to society’s expectations and compliance with the law.