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This paper develops a theoretical model on audit committee effectiveness after reviewing related previous studies. Corporate governance is believed as means of improving economic efficiency in a country. Corporate governance rules have economically significant impact on firm value. Previous literature generally argue that inclusion of independent, knowledgeable and expert members and delegation of adequate authority make an audit committee effective which plays significant role in the areas of financial reporting, internal auditing, risk management, dealing with external auditor, and compliance issues. Academic literature suggests that audit committee effectiveness has significant positive impact in minimizing agency conflicts and protecting stakeholders’ interests.
The research objective was to assess the efficiency of Audit Committee in strengthening public finance management in local government authorities. Several specific objectives were developed among them were to assess the impact of Audit Committee’s setup, composition and appointment in strengthening financial management and to identify factors affecting performance of Audit Committee.
The research methodology adopted was a case study research design in Bahi district council. Data collection methods comprised interviews, questionnaires and documentary review. The methods used for data analysis and processing were qualitative and quantitative as well as descriptive procedures.
The study findings revealed that objective and independent audit committee strongly improves the effectiveness of internal and external auditors, but several factors hinder the efficiency of the audit committees in executing their responsibilities of enhancing accounting and auditing functions. Based on the above, it is recommended among others that the current set up, composition and appointment of audit committees be overhauled and establish an objective and independent audit committees in all councils |
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