The role of an audit committee in bank solvency: An emerging market case

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Abstract

Recent discourse on corporate failures gives prominence to the impact of weak corporate governance systems in most corporate entities, hence reasons for investors and creditors pessimism. This literature review article seeks to articulate how audit committee could strengthen corporate governance in organizations. The paper reviews the guidelines developed by the Bank of Ghana to curb the degeneration of the Banking sector in Ghana following the collapse of seven indigenous banks between 2017 and 2018. The objective of this paper is to underscore the effective functioning of audit committees as a panacea to the corporate governance weaknesses in Ghana. The paper observes that albeit the Bank of Ghana, as a regulatory body, underscored weak corporate governance systems – it failed to emphasize mechanisms for strengthening audit committees in its guidelines to regulate the sector. The paper, therefore, promotes the presence and effective functioning of the audit committees as an additional layer to strengthen the monitoring and supervisory functions within corporate bodies. It recommends that the Bank of Ghana must emphasize the establishment of audit committees as a core part of corporate governance systems of all banks to ensure that the interest of all stakeholders is protected adequately through the oversight role of the audit committees.

Keywords: Audit Committee, Bank, Emerging Market, Solvency

JEL Classification: E58, G33, G34, G38

Received: 11.12.2018

Accepted: 25.01.2019

Published online: 04.02.2019

How to cite this paper: Salia, H., Addo, E. B., & Adoboe-Mensah, N. (2019). The role of an audit committee in bank solvency: An emerging market case. Journal of Governance & Regulation, 8(1), 38-46. https://doi.org/10.22495/jgr_v8_i1_p3