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Should Audit Committee Be Established in a Private Company?

In: Business and Management

Submitted By ieziey
Words 2737
Pages 11
Introduction
As we enter new millennium, it is a fact that the user of financial statement demanded more on audit function to implement audit attestation towards company’s financial statement whether for public listed or private company. It is due to their awareness of having a true and fair presentation of financial statement since they evaluate the company’s performance based on the company’s earnings which used to be the point at which the investors can make decision whether to invest or not.
However, the case of fraud and manipulation in a company are still critical and need to be monitored by certain functional department as such to be the whistle blower for any irregularities that may arise in the company. In fact, over the last decade, there were various regulatory agencies and interest groups in existence which had been aggressively promoting the idea of an effective audit committee in all public listed companies. Yet, the absence of audit committee in a private company might be the cause for unstoppable practices of fraud.
Therefore, the objective of this study is to determine whether the new theory of this formation of audit committee in a private company, can really help to eliminate or at least minimize the fraud. To achieve this goal, the study will conduct a survey based on questionnaires that will be distributed to the top management of a private companies, charted accountant i.e auditors and lecturers of audit course. The findings will be used to support the theory of this research. In the article, Albrecht (2008) declared, “the pressure may be the need to make earnings look better to meet debt covenants” (p. 22). It was true because the profit indicates the performance of a company and so creative accounting might be used to engineer the financial statement to have the so called profitable company.
Basically, there are two types of fraud which…...

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