Title

Voluntary audit committee formation and agency costs

Document Type

Journal article

Source Publication

International Journal of Accounting, Auditing and Performance Evaluation

Publication Date

1-1-2007

Volume

4

Issue

2

First Page

142

Last Page

160

Keywords

Agency costs, Audit committee, Audit quality substitution effect

Abstract

This paper finds that only a small proportion of listed companies in Hong Kong voluntarily establish audit committees prior to the implementation of the revised Code of Best Practice, which effectively mandated them. We show that firms with dispersed ownership, a greater proportion of outside directors, and that have a non-Big Five auditor, are associated with the voluntary adoption of audit committees. The latter result differs from other studies and it suggests that audit committees are a substitute mechanism for the employment of high quality auditors (using the Big Five as a proxy for high quality).

DOI

10.1504/IJAAPE.2007.015231

Print ISSN

17408008

E-ISSN

17408016

Publisher Statement

Copyright © Springer 2006

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Full-text Version

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Recommended Citation

Firth, M., & Rui, O. M. (2007). Voluntary audit committee formation and agency costs. International Journal of Accounting, Auditing and Performance Evaluation, 4(2), 142-160. doi: 10.1504/IJAAPE.2007.015231