Cowton, Christopher J. and Avison, Lynn (2012) UK audit committees and the Revised Code. Corporate Governance, 12 (1). pp. 42-53. ISSN 1472-0701

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Purpose - The audit committee is one of the most prominent board sub-committees, having a potentially important role to play in ensuring sound corporate governance. This paper examines and discusses the behaviour of companies following revisions to the UK’s Revised Code.

Design/methodology/approach - A variety of annual report data from a sample of 50 UK companies, stratified according to size, is collected and analyzed.

Findings - General compliance with many provisions of the Revised Code was found. All but one company had an audit committee comprising solely non-executive directors. However, in about a quarter of cases the chairman was a member, and in some cases directors were not ‘independent’ according to the Code’s definition. Nevertheless, many companies exceeded the minimum stipulated requirements, for example the number of non-executive directors on the audit committee or the number of meetings held. Some companies, though, did not follow recommended practice, particularly regarding the disclosure of information, and some explanations for non-compliance were weak.

Research limitations/implications - Compliance with disclosure demands regarding audit committees could be improved, as could the quality of explanations when the recommendations of the Code are not followed. It would be sensible for regulators to monitor this, provide more detailed guidance and highlight examples of good practice. Given the resistance of many companies to corporate governance regulation and accusations of ‘box ticking’, future research should probe why many companies do more than is required or recommended. The research should be repeated when further revisions to the Code are made in respect of audit committees, and practice in countries other than the UK should be researched to provide comparative insights.

Originality/value - The paper adds to the limited systematic evidence on audit committees, providing a baseline for research into further changes in the UK and practice in other countries.

Audit_committee_revision.pdf - Accepted Version

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