Effects of audit committee chair characteristics on audit quality: Empirical evidence from Saudi energy and materials sectors

Abstract

This study examines the effects of audit committee (AC) chair characteristics on audit quality in Saudi Arabia. This study applies logistic regression to investigate how AC chair independence, busyness, and expertise influence audit quality. The sample covers 282 firm-year observations of energy and materials companies listed on the Saudi stock exchange from 2017-2022. The results show a positive correlation between AC chair independence and expertise and higher audit quality, while a negative correlation exists with AC chair busyness. The results underscore the critical role of AC chair attributes in enhancing audit quality, aligning with findings from prior studies. The findings address a significant gap in how AC chair characteristics may affect audit quality in Saudi Arabia's unique context. The study's empirical contributions are particularly significant given the limited attention this topic has received in the context of a developing Middle Eastern economy. The analysis not only sheds light on the influence of AC chair characteristics but also provides actionable insights for optimizing audit committee structures to improve financial monitoring in light of ongoing Saudi reforms. The robust methodological framework and the consistency of the results with existing literature support the study’s validity and reliability. The findings advocate for strategic enhancements in AC chair selection criteria to bolster audit quality amidst the evolving governance landscape in Saudi Arabia.