The Role Effectiveness of Audit Committees in Saudi Listed Companies

Abstract

This paper examines the effectiveness of audit committees (AC) in carrying out their role of improving financial reporting quality (FRQ). Based on a cross-sectional sample of 101 Saudi nonfinancial listed companies for the fiscal year of 2014, the current study finds that AC independence and meetings are positively significantly related to improved effectiveness of ACs in improving FRQ. However, size and competency of the AC do not have an impact. The results imply that the governance structure to improve the effectiveness of ACs in Saudi listed companies needs to be revised. The findings shed light on the measurement of AC independence and suggest that a majority of independent directors is an important driver for greater AC effectiveness.

Keywords: Audit Committee, Competency, Independence, Diligence, Financial Reporting Quality