Audit Committee and Financial Reporting Quality: A Literature Review

Abstract

The quality of financial reports plays a significant role in ensuring that the information received by stakeholders accurately reflects the company's condition; Consequently, governance mechanisms such as audit committees are central to maintaining transparency and reporting reliability. This study aims to understand how audit committee characteristics contribute to enhancing financial reporting quality by synthesizing agency theory, signaling theory, and empirical findings from previous research. A systematic literature review was employed to examine the roles of audit committees, audit quality, corporate governance, reporting relevance, and the validity of financial reports. The analysis reveals that audit committee competence—particularly in accounting, finance, and industry knowledge—plays a major role in strengthening oversight functions, although variations in industry contexts and reporting quality proxies lead to inconsistent results. These findings underscore that audit committee effectiveness cannot be generalized universally; Rather, it is influenced by the quality of the committee's attributes, the company's internal dynamics, and the specific methods used to measure reporting quality.