THE ROLE OF EXTERNAL AUDIT ON COMPANY PERFORMANCE IN DEVELOPED ECONOMIES
THE ROLE OF EXTERNAL AUDIT ON COMPANY PERFORMANCE IN DEVELOPED ECONOMIES

Summary/Abstract: The financial statements of a company are important factors in the decision-making process of investors, because financial statements not only highlight the current position of the company but also its future performance. From this point of view, the audit has a very important role, as an inefficient audit committee implies that companies have insecure financial statements, therefore investor do not have confidence required to understand and evaluate in a timely manner the current position of the company. To test the impact of audit practices on the performance of new companies, we used a series of OLS estimates on a sample of the most developed countries in the Eurozone: Germany, France, and Italy. After analyzing the impact of audit practices on the profitability of listed companies in France, Germany and Italy, our results show that ensuring the independence of the audit committee has a positive effect on the profitability of the company calculated as the rate of return on assets, but the effect is reduced from the perspective of return on equity. Our results indicate that in the case of developed companies, the independence of audit committees has a positive impact on the overall performance of the company, even if it is lower. Therefore, investors and decision makers must consider establishing and ensuring the independence of external audit to ensure the premises for increasing the performance of companies.

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