The relationship between audit committee best practice and good governance

Abstract

Purpose: This study investigated, from a practice-theory perspective, whether audit committee best practice influences sound governance, applying the proxy of the external audit outcome.

Methodology: Binary logistic analysis was applied to determine a relationship between audit committee best practice and the external audit outcome, within a sample of South African private sector and public sector organisations, employing optimal scaling to reduce the items to a workable number of variables.

Findings: The results indicated that there is a statistically significant relationship between some audit committee ‘best practice’ practices and the external audit outcome – supporting practice theory.

Originality/Value: Although studies have investigated the relationship between certain audit committee characteristics and the external audit outcome, no study could be found where the influence of audit committee best practice on the external audit outcome was examined, supporting the worth of an effective audit committee in a time of regular corporate failures.