Edited by Susan Watson and P. M. Vasudev
Chapter 6: Empire-building: the rise of the audit committee
In the largest traded public companies, the range of activities now undertaken by board committees continually expands in a way which means that increasingly they are occupying the board’s ‘space’. This chapter focuses on the role of the audit committee. It starts with a detailed consideration of the evolving remit of audit committees, so that we may appreciate just how wide-ranging an empire they have carved out for themselves at the expense, perhaps, of the board’s authority. It then moves on to assess the implications of this empire-building for committee members in terms of the expertise required of them, their workload and remuneration. It then discusses the relationship between the committee and the shareholders, which is as yet rather underdeveloped, though with some signs that shareholders are looking for better engagement with and improved transparency from the committee. The relationship with the board is also considered, examining in particular the potentially high standard of care, skill and diligence required of the committee members, which can be contrasted with the board’s residual (and probably quite nominal) duty of supervision. Finally, the chapter considers whether, given its pivotal role, the audit committee requires some additional statutory underpinning.
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