The purpose of this paper is to identify the existence of audit committee and the practice of corporate governance in public sector entities. The requirement of audit committee and corporate governance has been increase in the corporate sector and also in public sector but there are small differences in the implementation between this two sector that has been discuss in this study. This study also discuss about the characteristic of audit committee, effectiveness of audit committee, the roles of audit committee and a few past studies about the implementation of audit committee in Malaysia and other country. The result from this review studies found that audit committee and governance has become important tools in public sector since the needs of reliable transparency of financial reporting. 1.
The concept of audit committee and corporate governance is not a new concept that has been introduced in accounting. This concept has been practiced by every single company in this world because of audit committees has become increasingly important component in governing the company. It became increasingly recognised as a part of modern control structures and governance practices on both private sector and also public sector. Audit committee is an important element of public accountability and governance process and plays role as key to the integrity in both private and public sector (Vendernest, 2008). This is same with what have been said (Gautier et al 2007), audit committee plays very big roles in every company’s regardless small company or big company audit committees is not only important on business entity but also important to public sector entity, public sector entities include the state and local government, federal agencies, colleges and universities, hospitals, city councils and others related with government, that is why audit committees has been formed in order to focus on governance in a company or an organization. The Sarbanes-Oxley Act state the important of audit committees since the cases of Enron and WorldCom happened in the recent years. The audit committees are important as one of the tools to detect fraud. Therefore, audit committees should be established in an organisation. Public sector entities also need to have the governance just the same as in other corporate sector, the impacts of unethical behaviour in corporate sector will affects the shareholders while the unethical behaviour in public sector will have the impacts on tax payers and citizens. (George. N, 2005) Besides, the existence of audit committees can help to increase the integrity and efficiency of audit process, the internal control and the financial reporting in public sector. A well designed audit committees should facilitate the governance body’s performance of its oversight role, thereby reducing, rather than increasing burden. Therefore, all governments, regardless of size or circumstances, should have an audit committee. (Gautier& Stephen J, 2007) In 1992, the Cadbury report on corporate governance recommended the establishment of an audit committee as an important feature within the code of best practice for corporate governance.
The term audit committees can be defined as an operating committee of a company's board of directors that is in charge of overseeing financial reporting and disclosure. Committee members must be made up of independent outside directors, including a minimum of one person who qualifies as a financial expert. Audit committees typically have the authority to initiate special investigations in cases where they determine accounting practices are problematic or suspect, or where problems exist with personnel. The audit committee's role includes the oversight of financial reporting, the monitoring of accounting policies, the oversight of any external auditors, regulatory compliance, and the discussion of risk management policies with management. 3.
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