Audit committee in Indian SMEs: are these effective?

Abstract

The purpose of this research is to evaluate the role of the audit committee's effectiveness in the corporate governance of Small Medium Enterprises (SMEs) in India. Based on the previous research studies of Klein (2002); Abbott & Parker (2000); and Xie et al. (2003) indicate a reduction in the earnings management due to an effective audit committee. Reduced earning management will lead to a better valuation of the firm in the financial market. The study examined the association between SMEs' performance with audit committee independence and the frequency of audit committee meetings. The study found that there is no significant relationship between the audit committee independence and frequency of audit committee meetings with the firm performance of Indian SMEs.