Association of Audit Committee Quality witli Internal Control Quality: A Study of Select Indian Companies

Abstract

The study focuses on the association between audit committee quality characteristics and internal control quality, so as to improve the quality of financial reporting by understanding and managing the audit committee characteristics. In this study, the concept of internal control quality and its association with audit committee characteristics by testing the hypothesis are presented in the context of select Indian companies.

Majority of the equity based listed companies at BSE have complied with the legal formalities like appointment of independent directors, number of meetings, size of the audit committee, legal and financial qualifications of the directors, as they were required for the listing at a stock exchange in India. The proportion of independent directors on audit committee and the proportion of directors on audit committee with legal qualifications have association with the internal control, but number of years the firm has been sharing information to the public. Proportion of financial expert on the audit committee, manager's educational background, managers with financial education background, number of directors on audit committee, number of audit committee meetings, firm age, geographic segments, growth and Constant were not influencing the internal control. Thus, it may be inferred that the companies may improve the internal control by managing the independent directors and directors with legal qualifications, as these characteristics have significant association with internal control.