Recent trends in audit committees of Maltese listed companies

Abstract

Purpose: This study seeks to assess the composition and role of the audit committees (ACs) in Maltese listed companies and how these may have changed throughout the last decade. Moreover, it aims to evaluate the percieved usefulness and effectiveness of such committees. This study also looks at the views of listed companies on some of the possible changes soon to be implemented by the EU Regulation 537/2014 and Directive 2014/56/EU and recommends how ACs can be enhanced in the future. Design: A qualitative research approach was adopted to achieve the objectives of this study. A total of 23 semi-structured interviews were conducted with nine AC members, ten internal auditors and four external auditors of Maltese listed companies. Findings: The study’s results show that most of the ACs are made up of three members as specified in the Listing Rules and meet approximately five to six times per annum. There were no significant changes in composition requirements and responsibilities of ACs of Maltese listed companies throughout the last decade. The AC provides several benefits to the organisation and its effectiveness is satisfactory. Moreover, the interviewees claimed that by Regulation 537/2014 and Directive 2014/56/EU the European Union is trying to clarify what is expected from the AC. Also, interviewees recommend that ACs should be made up of people with a strong character who are not afraid to question. Conclusion: This study concludes that ACs play a major role in corporate governance as there have been more awareness about their role within an organisation. However, more effective ACs are important since with the implementation of Regulation 537/2014 and Directive 2014/56/EU, the AC is expected to carry a broader role in corporate governance in the near future. Implications: Whilst ACs continue to apply the practices already in place, Maltese lised companies can adopt the recommendations included in the study to make the committee more effective.