Audit Committee Effectiveness and Firm Financial Performance

Abstract

The audit committee plays a central role in corporate governance by overseeing financial reporting, internal controls, and the external audit process. Its effectiveness is widely regarded as a key determinant of financial transparency and organizational accountability. This study examines the relationship between audit committee effectiveness and firm financial performance, focusing on structural characteristics such as independence, financial expertise, size, and meeting frequency. how an active and competent audit committee enhances the quality of financial reporting, reduces earnings management, and strengthens internal control systems. By improving monitoring mechanisms and promoting transparent disclosure practices, effective audit committees can increase investor confidence and reduce agency costs. These governance improvements may translate into better financial performance through enhanced operational efficiency, lower cost of capital, and improved market valuation.