PurposeThis study distinctively explores the firm-level and national-level determinants of audit committee effectiveness (ACE) in the Libyan banking sector (LBS).Design/methodology/approachA mixed-methods approach has been employed to enhance the quality of the collected data and reduce the risk of bias. Five groups of actors in the Libyan banking sector were surveyed, including board members, AC members, executive managers, internal auditors and external auditors, further to interviewing a representative sample of these groups. In total, 218 survey responses were gathered, and 20 semi-structured interviews were conducted.FindingsThe study results show that AC authority, financial expertise and diligence are positively and significantly attributed to ACE, although AC independence and resources are not significantly related to ACE. The authors find that the legal and regulatory environment, government intervention, and the accounting and auditing environment are perceived as important and associated with ACE regarding national-level factors. These findings are strongly supported by semi-structured interviews and suggest that both firm-level and national-level factors are essential in understanding ACE in Libya's banking sector.Research limitations/implicationsThe study’s evidence reiterates the vital need for more concentrated work to integrate governance, legislative and regulatory reforms to ensure the effectiveness of ACs as a key corporate governance (CG) mechanism in developing economies.Originality/valueThis study extends the literature relating measures of AC inputs and outputs by examining the perception of stakeholders to understand both the firm-level and national-level factors that affect ACE in a single institutional setting. Additionally, this work adds to the limited number of recent studies examining the role of ACs in the banking sector in developing economies.
This paper aims to explore the role of audit committees (ACs) in the Libyan banking sector (LBS) and to investigate the impact on AC practice of the sector's recent shift to an Islamic banking system. Little is known about the role of these committees, which were only made compulsory in Libya in 2010. The findings support agency theory in that they perceived these committees as being responsible for reviewing financial statements, the internal auditing function and the external audit process. However, the perception was that ACs are not currently carrying out these responsibilities effectively; participants perceived ACs as spending too little time reviewing financial statements, rarely challenging weaknesses in the work of internal auditors and seldom following up or supervising the work of external auditors. One explanation for this state of affairs is that ACs in the LBS are primarily designed to create legitimacy outside the organisation rather than to effect radical change within it. The study also found that it is not the application of Islamic law per se that is perceived as having an adverse impact on AC practice in the LBS, but the speed at which this transition is taking place in an already weak banking environment. This research helps expand our knowledge of current AC practice as a key mechanism of corporate governance (CG) by being the first to investigate how this role is performed in Libyan banks, which are in the early stages of implementing Islamic law. The research is also important because it addresses an information gap in the accounting literature by investigating AC effectiveness in a developing country, a context which is still poorly understood.
Financial scandals in developed countries such as the USA and the UK have highlighted the need for greater transparency and credibility in order to protect shareholders and stakeholders alike. It has been argued that the audit committee (AC) is a key mechanism for achieving this transparency and protecting shareholders' interests. While there have been numerous attempts to investigate AC practice and effectiveness in developed countries, little is known about how these committees operate in developing countries such as Libya. Therefore, this research aims to: (1) explore the current role of ACs in the Libyan banking sector, (2) investigate the factors that affect their performance and (3) identify actions to enhance their effectiveness.To achieve these aims, the study employed a combination of quantitative (questionnaire survey) and qualitative (semi-structured interviews) methods to understand how five groups of actors within Libya's banking sector (i.e. board and AC members, executive managers, and internal and external auditors) perceive the role and practice of ACs. The questionnaire survey was designed to collect initial data, while follow-up interviews sought to gain an in-depth understanding of all relevant aspects of the subject. In total, 218 survey responses were analysed, and 20 semi-structured interviews were conducted with senior directors and managers.
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