Abstract:
An audit committee is an operating committee of a company's board of
directors and it is a compulsory requirement for Sri Lankan listed companies
according to the ‘Code of best practices on corporate governance’ published
by the Institute of Chartered Accountants of Sri Lanka and Security and
Exchange Commission of Sri Lanka. This study was attempt to find out the
relationship between the audit committee characteristics such as Size of the
Audit Committee, Independence of the Audit Committee, Audit Committee
Meeting Frequency, Financial Literacy of Audit Committee Members and
financial performance measured by the Return on Assets and Return on Equity
of Sri Lankan finance companies. Twenty listed finance companies were
selected as sample for the period of 2012 to 2016. Descriptive statistics,
correlation analysis and multiple regression analysis were used to analyze the
data. According to the analysis, audit committee independence and audit
committee financial literacy showed a significant positive relationship with
firms’ financial performance. Audit committee meeting frequency
significantly related only with financial performance indicator of ROE.
However audit committee size did not have significant relationship with firm
performance. The results is beneficial to shareholders and companies’ board
to make appropriate decisions about audit committee characteristics to
enhance firm financial performanc
