The aim of this study is to analyze the effectiveness of audit committee as a mechanism of corporate governance on credit institutions in Croatia. Consequently, the main aim of the analysis is on relationship between audit committee and external audit, which are considered as two important and related corporate governance mechanisms. The research was based on a sample of 16 credit institutions that were granted the approval of the Croatian National Bank for work in 2016 and 2017. Using the responses from the annual Corporate Governance Code relating to the Audit Committee, a performance audit index has been created. Based on the sample and created IURO, it was concluded that there is a link between the efficiency of the audit committee and the performance of credit institutions, such as that a more effective audit committee contributes to the more successful operation of the credit institution. It has been established that there was no difference in the effectiveness of the audit committee given the size of the credit institution and the type of audit firm. However, it can be concluded that small credit institutions which operating with negative financial results, choose other audit firms. The relationship between the effectiveness of the audit committee and the number of key audit issues was tested and a conclusion was reached that the effectiveness of the audit committee does not depend on the number of key audit issues that the audit firms have set out in the audit report of the credit institution. Finally, 93.75% of the credit institutions has a positive audit opinion.