What do audit committees do? Transparency and impression management

Marking a significant step aimed at making governance more transparent the UK requires audit committees (ACs) to publish a report on their activities. Although regulators continue to emphasise the roles of ACs, there is limited evidence on what the AC does in practice. This paper provides evidence on the nature of AC actions as reported in AC reports relating to external audit, internal audit and financial reporting. We use summative content analysis to analyze AC reports of UK FTSE 350 firms and find that AC actions mainly entail reviewing processes and reports and there is limited incidence of them reporting that they have undertaken investigations into auditing and reporting issues. Moreover, what is reported is mainly general and descriptive of process. Our findings highlight the importance of AC reports providing meaningful information rather than engaging in symbolism. ACs can use their reports to signal their substantive monitoring and how they have contributed to improving auditing and reporting quality. The findings also suggest that future research examining the reviewing, investigating and outsourcing activities of boards and ACs can contribute to a better understanding of the governance process and outcomes.