The role of the audit committee in strengthening business ethics and protecting stakeholders' interests

Abstract

It is imperative for companies to do business ethically and to respect the rights of all the company’s stakeholders, while still being accountable to the shareholders. This article examines evidence from a literature and empirical study conducted on the role of audit committees in strengthening business ethics and protecting stakeholders’ interests. The study found that the majority of audit committee chairs believe their audit committees to be effective in discharging their responsibilities regarding business ethics. Of concern, however, are the findings that a large number of audit committees are not reviewing compliance with their companies’ code of ethics, although most of them are reviewing or providing a channel for whistle-blowing. The inspection of the annual reports further indicated a lack of disclosure by the audit committees on their responsibilities regarding business ethics.