The Added Value of Audit Committees within the Framework of Smart Auditing to Reduce Profitability Management Practices in Banks-Evidence from Saudi Arabia

Abstract

The aim of this research is to examine the management of profits by audit committees. This paper presents some innovative and compelling empirical findings regarding the four characteristics and value-added indicators of audit committees employing smart auditing to mitigate profitability management practices in Saudi banks. Using a purposive sample, we selected 10 banks listed on the Saudi stock market since 2011. To the best of our knowledge, the topic of the current study has not been sufficiently researched in the Saudi context. The empirical results revealed a statistically significant relationship between (committee size, number of independent members, and independence) and the value-added of smart auditing to mitigate profitability management practices in Saudi banks. However, the empirical results do not demonstrate a statistically significant relationship between the number of audit committee meetings and the value creation of smart auditing to mitigate profitability management practices in Saudi banks. Future studies could focus on potential areas of research in Saudi Arabia, other financial sectors, and other value-added indicators of audit committees, such as diversity in composition and knowledge and experience in artificial intelligence applications.