Strengthening Corporate Governance: The Interaction of Audit Committee and Company Characteristics in Fraud Prevention

Abstract

Financial reporting fraud is a critical concern in corporate governance, emphasizing the importance of strong oversight by audit committees as well as an understanding of organizational characteristics that contribute to fraud risk. This study explores the impact of audit committee features independence, financial expertise, meeting frequency, and tenure alongside company traits such as leverage, firm size, managerial ownership, and growth rate, on the occurrence of financial reporting fraud. Employing the Systematic Literature Review (SLR) method, relevant studies were gathered, assessed, and synthesized from academic sources available through Google Scholar. The findings reveal that audit committees that are independent, financially skilled, and actively engaged play an important role in lowering fraud risk, although overly long tenure may compromise their independence. Furthermore, firms with higher leverage and rapid growth are generally more prone to fraud, while the effects of firm size and managerial ownership vary depending on the context. Ultimately, the integration of effective audit committee oversight with company characteristics that reinforce sound governance is essential to reducing financial reporting fraud.