Recently, we heard many event fraud on well-known multinational companies and it is mainly due to corporate governance. Therefore, many government try to medicate this problem by establishing the system of audit committee. The purpose of this study was to explore how the establishment of audit committee can do in improving monitory functions. Our main conclusion can be divided into two parts. On the right hand, the company should develop a reasonable reward system to induce manger to work hard. On the other hand, whether the company want to form the audit committee depends on the expectation of operating result and the risk of litigation.