Implementation of “audit committee” and “independent director” for financial reporting in China

This study examines the effectiveness of audit committees and independent directors in China with a focus on their responsibilities in relation to financial reporting. In particular, it reveals issues arising from the importation of internationally acceptable governance mechanisms, using an integrated institutional perspective that incorporates institutional shapers and intra-organizational dynamics. The findings suggest that the institutional environment in China has yet to fully support the imported concepts. The implementation of audit committees and independent directors seems to be largely symbolic because the concepts are hardly used as instruments to improve the quality of financial reporting in China. They also show how contradictory institutional pressures shape loose coupling between regulations and actual operations, and intertwine with organizational players' conflicts of interest and power dependence within China's institutional setting.