Believing

As described in Chapter Five, ‘believing’ accounts represent ‘what the others have communicated to us’, i.e. the believing accounts come from a source. It may be argued that such believing may have formed a foundation for the interviewees on which to perceive the effectiveness of their audit committees. Figure 6-1 shows the screen cuts from NVivo 9 for the structure and nodes of the explanatory accounts.

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Table 6-13 categorises the believing accounts captured and analysed in the order of frequency. It is noteworthy that the believing accounts sometimes overlap between different sub-categories.

Table 6-13: Believing accounts Sub-nodes of ‘believing’

accounts

No. of

interviewees Examples

According to the audit committee charter or other documents

18

Interviewee 03:

“I thought of a particular responsibility that I was assigned. So I will talk about that. But just before I do that, in general terms, both of most companies’ [audit committees] have a charter. So it is usually in terms of your responsibilities, you know, it’s responsibilities you assume as a result of agreeing to the charter, and agreeing to the company or to the audit committee.”

Referring to perceived public

expectations 17

Interviewee 05:

“Huh… I mean an audit committee… if you define it, it is ‘auditing’... I mean it is auditing… risk… it is auditing compliance… compliance with the IFRS, if you like… that is a reasonable expectation from the shareholder…”

Referring to the regulatory

requirements 17

Interviewee 04:

“That’s all about the learning and understand the law, then be able to challenge the management around it. It’s getting more and more

complicated. The thing is (pause) this is the problem. A lot of regulations apply to the non- listed companies as well. So you get smaller companies with all of this rate of regulation and you still haven’t understood it all.”

Referring to the director’s duties to justify the audit committee’s responsibilities

13

Interviewee 11:

“I think the function of the board… the

directors… the totality is three things. One is to hire and fire the chief executive. Two is to guide the company’s strategy… And three is to look after the compliance of the business. To me I would argue that in terms of a successful business, all three are equal. And certainly going back 25 to 30 years, I believe they were treated equally.”

144 Sub-nodes of ‘believing’ accounts No. of interviewees Examples Referring to personal background or experience 12 Interviewee 10:

“So what motivated me? I didn’t actually put my hand up, I got conscripted because of my accounting background. That always happened. As soon as, someone says, “oh, good! You are a finance person, and you are on the audit

committee.””

Referring to the power or

authority of audit committees 7

Interviewee 19:

“… recommendations from the external auditors. Huh… I think it is a wrong question. I don’t think it is the management’s decision. It is not theirs… they don’t have the authority to decide if they will follow a recommendation from the external auditor, it is the audit committee’s decision.”

Comparing to other

organisations 7

Interviewee 02:

“But I am aware of some other boards I’ve been in. They have been required to pay the

directors; rather than a flat fee, they pay for the hours they work. And it works for some people. To get certain people on board, you just do have to do that. If you want that type of person, you must pay for it and then it’s a good thing for the company. Otherwise you wouldn’t have them.”

Consulting an external

organisation or expert 3

Interviewee 06:

“Now if I find that I am having a problem on an issue. I can always fall back and give a paper to the audit committee, and to the board, you know, based on what the Securities Commission, or the ASX, or the New Zealand Exchange expects - drawn from their best practice guideline which is all available publicly, or from my experiences at the IOD (Institute of Directors) or Society of Accountants’ continuing education courses.”

As mentioned previously, ‘believing’ accounts are communicated to the participants from a source and can be regarded as the foundation upon which the interviewees perceive the

effectiveness of their audit committees. The eight sources revealed from the interviews can be further classified as in Table 6-14.

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In those cases where the believing accounts had a perceptional component, they were often supported by perceptional accounts. For example, interviewee 03 said: ‘I thought of a particular responsibility that I was assigned. So I will talk about that. But just before I do that, in general terms, both of most companies’ [audit committees] have a charter (coded as

‘referring to the audit committee charter or other documents’). So it is usually in terms of your responsibilities, you know, it’s responsibilities you assume as a result of agreeing to the charter and agreeing to the company or to the audit committee’ (coded as perceptional account

‘perceiving’).

Table 6-14: Classification of believing accounts

Referring to an authoritative doctrine

 According to the audit committee charter or other documents

 Referring to the regulatory requirements

 Referring to the power or authority of audit committees Referring to a set of

well accepted principles

 Referring to perceived public expectations

 According to the director’s duties

Benchmarking

 Referring to personal background or experience

 Comparing to other organisations

 Consulting an external organisation or expert

As perceptional accounts reflect one’s indirect experiences; they may or may not be factual encounters of the participants. The participants intentively justify how they believe an effective audit committee should or should not do by referring to a source rather than what they have personally experienced as true. In other words, there are doctrines, principles, or

benchmarks that are believed to be true by the participants, and they have described these doctrines, principles, or benchmarks in making sense of their experience in audit committees, without always identifying any significant direct experience to support what they believed really took place. Turley and Zaman (2004) and Spira (1998; 2005) suggested that the audit

committee formation was an institutionalised phenomenon in the significant securities market of the world. The current research provided further evidence to support such a claim. The practice of having an audit committee, what it should do and what it is expected to achieve, has been institutionalised by the audit committee members in reality.

A question which can be asked at this point is: ‘why do some interviewees intentively conform to doctrines or principles, whereas others benchmark against other organisations?’ In

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section 6.4, the third round of coding, the analysis of these differences between interviewees will be discussed further.