AUDITING

Auditing and Ethical Practice

Executive Summary

In the recent years, audit committee has become an integral part of organizational structure to ensure proper accounting and audit reporting in accordance with the regulations of Securities and Exchange Commission. The paper has explored reasons behind the increasing role of audit committee in the recent years with an established emphasis on corporate governance and monitoring of internal and external audit affairs. Moreover, the paper has undertaken a list of contrasting views on the corporate principles of the US and Australia with respected to the defined parameters. Furthermore, the paper has drawn an empirical understanding of the degree of impact audit committee's activism may have on the opinion of auditors by conducting a thorough financial ratio analysis of the performance and associated risk of the selected Australian companies. Finally, the paper has summarized learned outcomes and understanding of the subject matter into a conclusion.

Key Words: Audit committee, internal and external audit, corporate governance principles, financial ratio analysis, Australian companies

Auditing and Ethical Practice

Introduction

The paper determines the cause of increasing role of audit committee in the organizational perspective. In order to drawn a rigorous understanding of the concerned issue, the paper explores contrasting elements of corporate governance principles in the US and Australia. Moreover, the paper selects four Australian companies based on the recommended criterion to study the presence and significance of audit committee in the selected companies.

Moreover, the paper conducts a financial ratio analysis of these companies to assess their chances of business continuation in the long run. Additionally, the paper examines the possible impact that audit committee may have on the opinion of auditors in the selected companies. Finally, the paper has drawn conclusion on the overall understanding and evaluation of the area under discussion.

Discussion

Increasing Role of Audit Committees

According to Cascarino (2007, p. 189), audit committee is responsible to oversee internal controls and functions of internal audit, to monitor fee budgeting and appointment of external auditors and to approve accounting policies that will be applicable to a firm. However, the role of audit committee has undergone apparent changes over time. Today, role of audit committee is seen critical to corporate governance due to the economic and global financial crisis of 2008 (Poprawa & Dale, 2010, p. 3).

Audit committee was held responsible to protect a company against probable obligation and to look after the information revealed by a company (PWC, 2011, p. n.d.). However, role of audit committees today has become more challenging and difficult due to increasing expectations of key stakeholders including regulators and shareholders. Audit Committees are required to assume the responsibility to manage risk by overseeing programs and policies of risk management incorporated by the company (Alhaji & Yusoff, 2012, p. 1).

Audit committees are needed to address the growing concern of shareholders, to take immediate measures and sensitive examination when an error or flaw is detected (PWC, 2011, p. n.d.). Audit committees are required to undertake proactive approach to prevent fraudulent acts and whistle blowing ...