Audit committees: practices, practitioners and praxis of governance
Abstract
Purpose
The purpose of this paper is to review and critique prior research on audit committees using a practice-theory lens. Research on audit committees has followed the same trajectory as early research on boards of directors, which has been criticised for its singular theoretical perspectives and methodologies that do not capture the complexity of real-world experiences/behaviours.
Design/methodology/approach
The authors devise an analytical framework based on practice theory to conduct the review. The authors examine what audit committees should do (i.e. best practice) vs what audit committees actually do (i.e. actual activities in practice – praxis). Attributes of audit committee members, and the relationship dynamics relevant to their role execution (i.e. practitioners), are considered.
Findings
Research on boards has found that over-emphasis on agency theory’s monitoring role negatively impacts boards’ effectiveness. The authors invoke other theories in examining what audit committees do in practice. The authors characterise the role of audit committees as oversight not monitoring. The authors question whether, similar to auditing, audit committees are blamist tools or are genuinely orientated towards supporting improvements in organisational management systems. The authors unpack the ritualistic ceremonial behaviours and symbolic endeavours vs substantive engagement by audit committees. The analytical framework also considers the “guardianship circle” around audit committees in the form of the key practitioners and their relationships: audit committee members, auditors and managers.
Originality/value
Drawing on the analytical framework, the authors provide directions for further opportunities for research of audit committees.
Keywords
Acknowledgements
A first draft of this paper was written during a Research Performance Panel Visit to the University of South Australia Centre of Accounting, Governance and Sustainability in July 2010, for whose support the authors are grateful. The authors are also grateful for helpful comments on earlier drafts of the paper from Yves Gendron. Stuart Turley and from participants at the Irish Accounting & Finance Association Conference, Gregynog Accounting and Finance Colloquium and at seminars at the University of Victoria, Melbourne and the University of Otago, New Zealand. Finally, the paper has benefited from the insights of the reviewers and editors and is much improved as a result.
Citation
Brennan, N.M. and Kirwan, C.E. (2015), "Audit committees: practices, practitioners and praxis of governance", Accounting, Auditing & Accountability Journal, Vol. 28 No. 4, pp. 466-493. https://doi.org/10.1108/AAAJ-01-2015-1925
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited