Perceived Social Power and Audit Committee Effectiveness in Malaysia: The Conceptual Model

Decision is best implemented using the social power. Social power exists in everywhere and needs for every organization actor. As an independent governance mechanism, Audit Committee (AC) needs social power to achieve the desired governance outcome. However, study of the social power which contributes to AC effectiveness is limited, especially in Malaysia. Majority of the past researches only focused on the formal characteristic as the contributor for AC effectiveness. A comprehensive view on AC studies is needed. With ongoing frauds, public confidence towards AC effectiveness has been impaired. Factors which will enhance AC effectiveness have become the major concern. Thus, this research attempts to propose a conceptual framework to investigate the influence of perceived social powers: independence, expert, legitimate, institutional support, diligence and sanctionary power towards AC effectiveness. This paper seeks to close the literature gap by investigating the AC effectiveness in different dimension and leads to deeper understanding of AC dynamic powers. It provides guidance to AC members on which social power is important and how these powers affect their effectiveness. It also sheds some light for the regulators to identify the AC social power which contributes to the effectiveness that cannot easily be codified in the governance code.