INTRODUCTION
There has been considerable interest in recent years
in the role of the audit committee as a key corporate
governance mechanism. Corporate governance
committees and regulators around the world have
addressed the need for effective audit committees,
with many requiring that listed companies must
have a committee (European Union (EU) 8th
Company Law Directive, 2006; Smith Report, 2003;
United States (US) Congress, 2002). Recognising
that the existence of a committee does not
guarantee that the committee will be effective,
attention has moved to the composition and
activities of audit committees. Recommendations
have focused on the independence and expertise
of committee members and the frequency of
committee meetings (Smith Report, 2003;
Australian Stock Exchange Corporate Governance
Council (ASX), 2003; National Association of
Corporate Directors (NACD), 1999). However,
research suggests that there is considerable
divergence in the recommended structure and role
of audit committees across different jurisdictions
(Collier & Zaman, 2005).
Following the well-publicised corporate
collapses (such as Enron and WorldCom in the
US and HIH Insurance and Harris Scarfe Ltd
in Australia), the efficacy of audit committees
has been challenged (Turley & Zaman, 2004).
Legislators have responded by expanding the
responsibilities of audit committees and placing
greater emphasis on the role that they play in
enhancing audit independence (US Congress,
2002; Commonwealth of Australia, 2004).
However, research evidence that demonstrates the
value of audit committees is sparse, particularly
outside North America (Spira, 2003). As Spira