Corporate Governance: The Role and Effectiveness of the Audit Committee in Bahrain

Abstract

the role of the audit committee to monitor and oversee financial reporting has increased. This is largely attributed to the global business scandals caused mainly by fraudulent financial reporting. In response, the role of audit committee was questioned in an attempt to maintain user’s confidence in corporate financial reporting and improve the effectiveness of an adequate internal control Not least because, an audit committee is an independent body created by the board to oversee financial reporting and disclosures, monitor effectiveness of internal control, and external and internal audit functions. At present, there is no conclusive evidence on the role and effectiveness of the audit committee. At one end of the spectrum there are audit committees that see their role as the validation of financial statements, while at the other end, are those who have broadened their role to include oversight of performance and critical high level business and operating tasks. The purpose of this research is twofold: First: to investigate the state of the art of audit committees in Bahrain regarding composition, meetings, independence and role of audit committees. Second, since “Blue Ribbon” recommendations were issued in 1999, effectiveness of audit committee has become a cornerstone for corporate governance. Therefore, an objective will be to assess effectiveness of audit committee.