Avison, Lynn and Cowton, Christopher J. (2008) Responding to the Revised Code on corporate governance: UK audit committees. Working Paper. Financial Ethics and Governance Research Group University of Huddersfield, Huddersfield, UK. (Unpublished)
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Purpose: The audit committee is one of the most prominent sub-committees of the board of directors, having a potentially important role to play in ensuring sound corporate governance. The purpose of this paper is to examine and discuss the behaviour of companies following the most recent revisions to the UK’s Revised Code.

Research 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 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 case directors were not ‘independent’ according to the definition of the Code. 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. Nevertheless, some companies did not follow recommended practice, particularly regarding the disclosure of information, and some explanations for non-compliance seemed weak.

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. 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.



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