Audit committees in Maltese listed companies and their perceived effectiveness : an assessment

Abstract

Purpose: In this study we assess and analyse the effectiveness of Audit Committees within Maltese Listed Companies with respect to the following five determinants: composition, authority and resources, diligence, internal audit contribution and assessment. Design/Methodology/Approach: In order to ensure that the objective was achieved, this study adopted a qualitative mixed-method approach to collect data. Sixteen semi-structured interviews were conducted with ten Maltese Listed Companies representatives, four External Auditors and two Regulators. Findings: The findings indicate that there is still some disagreement as to the extent of Maltese Audit Committee Effectiveness. The appointment of Audit Committee members is left to the discretion of the Board, which tends to appoint the Non-Executive Directive to the Audit Committees without sufficient considerations for their competences and possibly their effective independence. Additionally, Audit Committees might be over-burdened with extremely varied objectives and with insufficient resources for them to reach all such objectives. Practical Implications: Audit Committee meetings held by Maltese Listed Companies seem to surpass the minimum requirement stipulated by law and this is perceived to be contributing to their effectiveness. Moreover, although Internal Audit Functions are seen as fundamental for Audit Committees to reach their objectives, the lack of a statutory requirement to establish IAFs is probably negatively impacting Audit Committee Effectiveness. Originality/value: Finally, although there seems to be a general opinion that Audit Committees assessment is necessary, the introduction of tighter regulation, such as a statutory requirement to introduce an independent third party in such process, is likely to encounter opposition.