The Requirements for The Formation of Audit Committees and Their Effects in Improving The Quality of Financial Reports and Narrowing the Expectation Gap

Case Study at Asiacell Communications, Private Equity Firm

Abstract

    Preserving public money, protecting the rights of shareholders and investors, preventing cases of manipulation and fraud, especially in light of financial crises and a large number of bankruptcy and money laundering cases, requires attention to monitoring and auditing activities with the aim of improving the relationship between the public of investors and the management of the company on the one hand, and between These investors and external auditors on the other hand. These issues have captured the interest of professional organizations and societies that have taken upon themselves to set laws and standards regulating the nature of the accounting and auditing professions in a way that enhances users' confidence in the credibility and fairness of the published financial reports for companies. This interest crystallized, in part, by issuing the necessary laws and instructions for the formation of audit committees in corporations. On this basis, this study came with the aim of identifying the requirements for the formation of audit committees and their effects on improving the quality of financial reports and narrowing the expectations gap, which may be left by the lack of confidence of shareholders in the audit process. To achieve this goal, the study followed a case study approach in the head quarter of Asiacell Company in Sulaymaniyah governorate, by evaluating the quality of the financial reports for the fiscal year ending on (31/12/2019) and using descriptive analysis and statistical equations. The study also followed the descriptive and analytical approach, whereby a questionnaire was designed as a tool to collect data from the shareholders of Asiacell Company. (50) Questionnaires were distributed, and (40) questionnaires were retrieved from them about the expectations gap in the company, the sample of the study. And among the most important findings of the study, there is a clear legislative deficiency in the Iraqi Companies Law No. 21 of (1997) amended regarding the formation of audit committees, as well as the formation of the audit committee by Asiacell in (2011) in compliance with the requirements of the Ooredoo Qatar Group of companies on the one hand, and the recommendations of the International Institute of Internal Auditors on the other hand. The study concluded with a set of recommendations, the most important of which is amending the texts contained in the Companies Law No. (21) Of (1997) amended concerning the formation of audit committees and defining their tasks, powers, and working mechanisms. The study recommended the necessity for the audit committee in Asiacell to issue financial reports published with The Company’s annual reports or the disclosure in those reports of its activities that enable it to contribute to improving the quality of financial reports and narrowing the expectations gap.