Organization of Audit Committee in Board of Directors and Rules for Its Operation
The establishment of audit committee in Board of Directors is conducive to reducing the agency cost caused by the separation of ownership and management in modern companies.The new Company Law has introduced audit committee,but the rules for its organization need to be added to ensure its intended effect of supervision.Qualification of audit committee members is the basic premise for the formation and performance of audit committee,which includes two elements of independence and professionalism.Independent directorship is the logical starting point of the objective and fair supervision of audit committee.It should be inspected from the whole process of its service,and any barrier for its acquiring information must be eliminated.In the light of the expanded roles of audit committee in both financial affairs and operational supervision in the new Company Law,the professionalism should be interpreted beyond financial and accounting knowledge as an ability to ensure proper functioning of the company.In addition,it is necessary to adjust the advance procedures of selecting employee directors and independent directors and to reduce the absolute control of majority shareholders over the selection.
new Company Lawaudit committeeindependenceprofessionalismadvance pro-cedures