Enhancing Audit Committee Independence in Corporate Governance: An Alternative View of Appointment and Reporting Structure

Abstract

Globalization of audit committees as a common mechanism of corporate governance is one of the most significant developments during the last two decades in several countries (including United States, Singapore, United Kingdom, Australia and Canada). Following the recent saga of corporate failures and the dramatic collapse of Enron, Worldcom, Cendant and HIH on the international arena and National Bank of Fiji locally (Fiji Islands), it provides continuing evidence of failures of corporate governance at all levels including senior management, boards of directors, the audit committee, external auditors, financial regulators and the accounting and auditing profession. Probably, at present this is the hottest issue and it provides a watershed opportunity for this study to contribute to our understanding of the value and potential of audit committees as a governance mechanism by bringing together arguments associated with their appointment and reporting structure in the context of the agency theory approach. This study is based on the theme ‘audit committee independence in corporate governance’ and in particular ‘the appointment and reporting structure of audit committees affecting their independence in the corporate governance practices of private sector corporations, in particular, the listed public companies in Fiji’. The advent of these Independent audit committees in Fiji would facilitate the setting up of international collaboration approach to the globalisation of audit committees in corporate governance. This would be achieved in terms of new and improved auditing standards, and the mounting pressure from institutional investors and stakeholders would allow for greater compliance to prevent ethical and financial crisis.

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