Corporate Administration and Risk Management: Audit Committee Role

This report delves into the critical role of the audit committee within corporate administration and risk management, emphasizing its impact on financial reporting and organizational efficiency. The analysis explores the committee's influence on various aspects, including the development of financial conditions, risk management strategies, and the quality of non-financial information, particularly intellectual capital. The paper highlights the importance of audit committee attributes such as size, independence, and financial expertise, and their effects on the financial health of the organization. The report also examines the committee's role in ensuring regulatory compliance, overseeing internal auditing processes, and managing relationships with external stakeholders. The findings underscore the audit committee's significance in maintaining ethical standards, preventing fraud, and promoting effective corporate governance, offering a comprehensive understanding of its essential functions and contributions to organizational success.

Running head: CORPORATE ADMINISTRATION AND RISK MANAGEMENT
Corporate Administration and Risk Management
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Abstract
The paper was written based on the role of the audit committee. The paper would
explain about the importance that the audit committee has on the organisation. From the
paper, it was evident that the audit committee helped in the development of the financial
development of the organisation. The audit committee is being developed to look into the
entire working of the organisation. This is a research paper that helped one to understand that
the entire power of the organisation is in the hands of the audit committee. Hence, finding in
the paper that had helped to understand the necessity of the audit committee and its way of
working.

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Table of Contents
Introduction................................................................................................................................3
Putting the study into context.....................................................................................................4
Prior Literature...........................................................................................................................5
Theory and hypothesis development..........................................................................................7
Research method......................................................................................................................10
Research finding.......................................................................................................................11
Conclusion................................................................................................................................12
Reference List..........................................................................................................................14

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Introduction
The corporate administration is completely dependent on the financial condition of
the organisation or the country that will help in the development of the revenue of the
organisation (Beretta, Demartini, & Trucco, 2019). Development of the financial condition
that will ensure the organisation that it will be beneficial during the time of risk. Finance
plays an important role that will help in the de elopement of the condition of the organisation
in the market. There has been a rise in the usefulness of the traditional finance statement
(Ishak & Al-Ebel, 2018). In the risk management of the organisation, its intellectual
properties play an important role. It can also be said that intellectual properties are the ones
that are developed for the risk management of the organisation. The audit committee of the
organisation looks into the quality of the non-financial information of the organisation. The
intellectual capital (IC) and audit are interconnected that have been acting as the pillars of the
corporate administration. From the research of AbdifatahAhmed Haji, it is evident that the
financial state of the organisation will have an impact on the working of the organisation.
According to Puwanenthiren (2018), the prime function of the audit committee in an
organisation is to ensure that the customers are being provided with the best quality product
that will help in the effective delivery of the products. The information that is being often
overlooked by the employees is being brought into notice by the audit team. The purpose of
establishing an audit committee in an organisation is to provide insight into the financial
reporting process wherein they will be ensuring that the organisation is maintaining the rules
and regulations (Haji, 2015). The paper will help in the analysis of the audit committee in an
organisation that has an impact on the development of the organisation and improvement of
the efficiency of the organisation.

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Putting the study into context
As has been discussed earlier, the audit committee has been developed to bring in
various changes in the products of the organisation. The following aspects will help to
understand the importance of the audit team in the organisation. As mentioned by the
researcher Al-Matari, Al-Matari & Homaid (2017), in their paper, there has been an increase
in the quality of the product as well as the performance of the organisation bringing in
changes in the way of working. The audit committee provides an insight for the employees
that will help in the development of the performance and the productivity of the organisation.
It has been observed that the organisation that has developed an audit committee team has
been developing and meeting the needs of the customers with an evident rise in the financial
condition of the organisation.
Moreover, according to Gorshunov, Armenakis, Harris & Walker (2019), the
development of the audit committee has been helping the organisation to create and maintain
an effective anti-fraud program. As the audit committee keeps a regular check on the finance
as well as the effectiveness of the organisation, they have a controller on the fraud that can
take place in the organisation. Apart from that as Chen & Komal (2018), mentioned the
development of the audit committee encourages the organization’s leadership team that can
develop a comprehensive ethics and compliance program. The audit committee also plays a
significant role in the reviewing of the program proactively.
From the research paper of Inaam & Khamoussi (2016), it has been evident that the
audit committee also has a significant impact on the internal audit function. It acts as the eye
and the ear of the audit committee that meeting the organization’s ability to meet the financial
and compliance responsibility that enables the organisation to adjust practice and have a
control on the internal working of the organisation. It helps in the development of the
working of the external audit team that helps in reducing the stress on the work that is being

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performed by the audit committee. The audit committee has an impact on the stakeholders as
well. The board has a responsibility towards the integrity and accuracy of the financial aspect
of the company; hence, it is an indication that the finance of the organisation, which will be
affecting the working of the stakeholders. The task that is being performed by the audit
committee will also be affecting the shareholders as well as the internal stakeholders bringing
in changes in the way of working. The paper “Role of audit committee attributes in the
intellectual capital disclosure” also explains the impact of the audit committee in the
stakeholders especially the employees of the organisation (Haji, 2015). Hence, it explains that
the audit committee has a great impact on the working of the organisation. One can even say
that the audit committee is being developed for keeping a check on the working of the
employees (Bansal & Sharma, 2016). It ensures that the employees are efficient and
productive.
Prior Literature
The audit committee not only looks after the working of the employees but also have
an impact on the products that are being developed by the organisation. In the opinion of
Alqatamin (2018), the audit committee has a great impact on the overall working of the
organisation. It not only looks after the finance of the organisation but also ensures that the
entire operations of the organisation are being developed with few initiatives that are being
taken by the audit committee. The audit committee ensures that the products that are being
provided to the employees are one of the best quality that will help in the meeting of the
needs of the customers.
As explained by Balasundaram (2019), the loyalty of the customers can be obtained
only by providing them with the best products that will be worth the value that is being
provided by the customers. The audit committee ensures that every product that is being
delivered in the market is of the finest quality and there must not be any complaints regarding

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the product on behalf of the customers. The audit committee in the various organisation has
various roles. Even in some of the organisation, the audit committee helps in training the
employees or takes initiatives to help the employees or workers understand the lacking in
their performance that will help in the development of the best quality product. Hence, with
the changes in the requirement of the customers, there are changes in the marketing strategies
that are being delivered by the audit committee in the organisation.
The organisation that has developed the audit team relies on the audit team for various
actions that are taking place in the organisation. The board of directors and the management
is partially dependent on the audit team in the daily operation of the organisation. The main
role that is being performed by the audit team according to is it looks into the financial
reporting and disclosure process of the products. Monitoring the principles and choice of the
accounting policies of the organisation is another responsibility that is being taken up by the
audit team.
In the words of Ghafran & O'Sullivan (2017), the audit, the team also has a check on
the hiring, independence and performance of the external auditors. It also looks into the
internal auditing and has control over the process of the internal auditing. The audit team also
ensures that they oversight the regulatory compliance, ethics and whistle-blower hotlines.
Hence, it is evident that the audit team has an impact on the working of the internal audit
committee. One of the most important responsibilities that are being performed by the audit
team is a discussion of the risk management policies and practice the policies with the
management.
While Bhattacharjee, Chakraborty & Bhattacharjee (2017), discusses about the
oversight of the financial reporting and accounting, it explains that the audit team has to
review the financial statement of the organisation and ensure that the finance that is being

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invested is invested in the right place that will help in the improvement of the working of the
organisation. Every organisation has some principles when it comes to the financial statement
of the organisation. Hence, the audit team ensures that the organisation is following the
financial policies that will help in the development of the working of the internal stakeholders
of the organisation. As discussed by Chariri, Januarti & Yuyetta, (2017), the audit committee
approves the selection of the external auditor. In case there is any change taking place in the
external auditor, it has to be approved by the financial committee.
Theory and hypothesis development
Size of the audit committee
From the research of Abhayawansa & Guthrie (2016), it is evident that the audit
committee has an influential impact on the working of an organisation. The audit committee
is an integral part of the organisation that looks into the working of the non-financial aspects
of the organisation. An integral part of the organisation that will ensure the development of
the effectiveness of the organisation. According to Buallay & Al-Ajmi (2019), the committee
of an audit mainly includes three members who are the non-executive directors of the
organisation. The chair of the organisation mainly forms the audit team wherein the chair of
the organisation with different another member of the organisation who has experience in the
organisation for several years. Depending on the organisation, the audit team is being formed.
Researchers like Cohen, Krishnamoorthy & Wright (2017), said that three to four
members who have an influential position in the organisation are forming the audit
committee, which is most common in every organisation. The smaller the committee the lees
issues will be created. It has been mostly found from surveys that have been performed in
various organizations by He, Pittman, Rui, & Wu (2017), that with the increase in the number
of members in the audit committee, there will be issues in the decision making of the

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organisation. Hence, to keep it simple, the organisation ensures that the members of the audit
committee must be less in number with deep knowledge.
H1: The size of the audit committee and Intellectual Capital disclosure have a positive impact
on the relationship.
Independence of the audit committee
In the development of the audit committee, there is a great sign that has an impact on
the working of the employees. The organisation has allotted various powers to the audit
committee that enables it to work independently as a committee. According to Khafid &
Alifia (2018), the audit team has the right to investigate in any activity that is under the terms
and conditions of the audit committee, if the committee finds any unethical activity that is
being performed by the organisation. While the investigation in the activities of the
organisation no department of the organisation has the right to interrupt, their activity and
they have the right to handle the work with independence.
The audit committee has the right to decide for the employees of the organisation. In
case they find any of the changes that can help in the development of the working process of
the employees, the audit committee has the right to make it a policy. As discussed by Kavida,
Harun & Murshid (2019), the audit committee has the right to obtain policies that will help in
the development of the working of the organisation. Hence, the audit team has various rights
that enable it to be an independent entity of the organisation.
H2: The independence of the audit committee and Intellectual Capital disclosure have a
positive impact on the relationship.
Audit committee as the financial advisors

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The Malaysian Security Commission, as discussed in the paper “Role of audit
committee attributes in the intellectual capital disclosure,” has the right in the financial
decision making of the organisation (Haji, 2015). In fact, the audit team has a significant
impact on the finance of the organisation. Various changes in the organisation are brought
with the changes in the policies of the finance of the organisation that has an impact on the
audit team. As discussed by Kartika (2018), the audit team is the financial advisor for the
organisation as the audit team looks into the satisfactory level of the consumers based on the
product; moreover, the audit team is directly in contact with the customers. Hence, changes in
the market are first being witnessed by the audit team, which is later on being implemented in
the policies of the organisation, which bring in changes in the finance of the organisation.
H3: The financial advisor of the audit committee and Intellectual Capital disclosure have a
positive impact on the relationship.
Audit committee meeting
As Haji (2015) has mentioned in his paper that, in the board meeting that is being held
in the development and keeping a check on the effectiveness of the organisation includes the
audit committee. The audit committee is an integral part of the organisation that looks into
the financing as well as the effectiveness of the organisation, ensuring that the desires of the
organisation are being fulfilled. The paper signifies that the audit committee is mostly made
up of the directors who look in the development of the organisation; hence, there is a limited
meeting that is being taken place in the organisation.
Moreover, it becomes difficult to arrange numerous meetings, as the directors are
mostly busy in their schedule. However, in the revision of the policies and effectiveness of
the organisation, they need to arrange a meeting that will help in the face-to-face discussion
among the management that will help in the development of the efficiency of the organisation

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(Martins, Morais, Isidro & Laureano, 2018). The meeting is being arranged to maintain the
relationship with the committee as well as the management that develops the communication
gap in the organisation.
H4: The meeting of the audit committee and Intellectual Capital disclosure have a positive
impact on the relationship.
Control variable
The relationship between the audit committee and Intellectual Capital disclosure has
an impact on the entire working of an organisation that includes the structure, size of the
company, ownership structure, profitability and various other governance of the organisation.
Research method
Method of sampling
The process of collection of data based on which the researcher samples the
information that will be introduced in a paper is based on the importance of the information.
It is based on the probability and non-probability of the sampling techniques. The information
of the paper is majorly collected from secondary sources from the latest research between the
years 2016 to 2020 (Rummell, DeZoort & Hermanson, 2019).
IC disclosure Instrument
The IC disclosure has been mostly collected from the content analysis approach.
Based on several research paper that has been developed by the various researcher has been
generated in the paper.
Data Analysis
The data has been analyzed based on the surveys and evident information that helps in
the generation of qualitative research. In the analysis of the qualitative data, the thematic data

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will be undertaken (Naimah, 2017). The information that is being collected is from various
papers based on the research topic.
Research finding
Fig 1: Work performed by the audit committee
(Source: Zhou, Owusu-Ansah & Maggina, 2018)
The paper has helped to understand that the audit committee has significant power in
the organisation. The audit committee helps in the development of the policies along with the
development of the financial features of the organisation. It ensures that the organisation will
have significant development in the revenue of the organisation (Haji, 2015). In the
implementation of a new product and its efficiency becomes easier with the audit committee.
The audit committee helps in the monitoring of the task that is being performed by the
employees. Hence, the organisation does not have to keep a continuous check on the
efficiency of the employees. It looks at accountability as well as the performance
management of the organisation (Zhou, Owusu-Ansah & Maggina, 2018). It gives clarity to
the employees about their performance that will bring in changes in the efficiency of the
organisation. With digitalization, it has become easier for the audit committee to