306 Indian J. Edu. Inf. Manage., Vol. 1, No. 8 (August 2012) ISSN 2277 – 5374 Research article “Quality of audit commitee” Mahdi Salehi Indian Society for Education and Environment (iSee) http://iseeadyar.org/ijeim.html The study of factors affecting the quality of audit committee Mahdi Salehi 1 , Majid Zanjirdar 2 , Fatemeh Zarei 3* 1 Assistant Professor of Accounting, Ferdowsi University of Mashhad, Iran, 2 Assistant Professor of Accounting, Arak Branch, Islamic Azad University, Arak, Iran *Corresponding Author: Dr. Fatemeh Zarei, Arak Branch, Islamic Azad University, Arak, Iran, E-mail: Fh.zarei@yahoo.com Abstract The expansion of private ownership scope, through privatization of state owned enterprises and decentralization has increased the attention towards the capital owners’ interests to strengthen accountability culture and to promote the information transparency of companies and other economic units in which all or a part of capital is supplied by the public. This aims to require mechanisms to ensure the proper governance in companies and other economic firms. Corporate governance has particular elements. Audit committee is a key element of corporate governance that strengthens the health of financial reporting. In the current study it is attempted to examine factors affecting the quality of the audit committee. The research sample includes all financial managers or board members of listed companies in the Tehran stock exchange in which the final sample consists of financial managers or board members of 185 listed companies. The research results indicate that the enhancement in independency, expertise and activities of non-executive members of board increases independency, expertise and activities of the audit committee and also there is a meaningful relationship between the size of non-executive members of board and the size of the audit committee. Keywords: Audit committee, Board of directors, Executive members of board of directors and Non-executive members of board of directors. Introduction Given the increasing use of financial intelligence from economic units and also the need to ensure the accuracy of their information, it is required to employ some people whose services including the handling of documents, accounts and accounting documents of firms will result in the discovery of any misuse and possible frauds, and also they provide their unbiased opinions related to the accuracy of this information. These persons are usually selected among non-executive members of board of directors and outside managers (Carcello & Neal, 2000). In recent years, developed countries have witnessed the fast emergence and evolution of the audit committee. Expansion of international operations, increased activities of corporations, increased debt resulting from damage to the environment, the role and impact of management estimates on figures contained in financial statements and reports, absence of a credible basis for evaluation of management’s claim regarding the adequacy of internal control structure by independent auditors, expanded the use of computer systems and subsequently more difficult monitoring and controlling of these systems have intensified formation and implementation of the audit committee (Asabakhsh, 2010). The audit committee is one of the firm’s board committees consisting of 3 to 5 and in some cases, 7 non-executive members of the board whose ultimate responsibility is to oversee all financial activities of the company (Arense & Loebbecke, 2003). Among the duties of the audit committee, the others are to help choosing the auditor, to manage auditing process, to review audit results, to help board members getting better understanding about audit results and to work with management and independent auditor solving internal control problems or weaknesses identified during the audit process. If the audit committee is organized and employed correctly, it can have significant benefits for all interested groups. Audit committee has the ability to strengthen the stewardship capacity of board of directors with regard to reporting and also is able to improve communication between management and independent auditor and the