The role of the audit committee in improving earnings quality: The case of industrial companies in GCC

Abstract

We examine three audit committee characteristics, including the audit committee independence, the size of audit committee, audit committee diligence/meetings to identify if any of these characteristics differentially impact earnings’ quality. The sample included 23 industrial firms from the Gulf Cooperation Council (GCC) financial markets during the period of 2014-2018. To achieve this goal, the study measures earnings quality using DeAngelo (1981) model and accrual accounting. By using the panel fixed-effect regression, our analysis reveals that bigger audit committees with more independence are more likely to be associated with earnings quality in GCC industrial firms. We also find that the audit committee diligence/meetings have no impact on earnings quality.