Audit committees’ oversight role in developing countries: evidence from Jordan

Abstract

Purpose This study aims to explore the opinions of audit committee (AC) members on the extent to which they fulfil the oversight role vested in them by the Jordanian Corporate Governance Code (JCGC). Design/methodology/approach This study uses semi-structured interviews with 18 AC members. Findings The findings suggest that although ACs largely meet the JCGC’s recommendations, their substantive oversight role in practice is limited. In particular, the responses indicate that ACs suffer from a lack of real power, especially concerning the appointment (or removal) of external auditors and the evaluation of internal control. Moreover, ACs have no actual role in issues deemed important for financial reporting quality (e.g. reviewing management estimates and evaluating chief financial officer (CFOs) and internal audit executives). Originality/value This study provides rich insights into ACs’ oversight processes in a setting outside the Anglo-Saxon corporate governance model where knowledge is scant on the ACs’ real function. Hence, the study injects the literature with new qualitative-based evidence from a peculiar civil law country. Also, Jordan has spent time and energy trying to strengthen corporate governance practices to boost investors’ confidence. However, the interviewees’ responses indicate that the oversight role of the AC is still far from what the regulators anticipate. Therefore, the findings offer useful feedback for regulators to think more deeply about the current governance regulations. The feedback from this study can be extended to other developing countries with similar institutional environments, especially countries in the Middle East and North Africa.

Audit committee characteristics and firm performance: a cross-country meta-analysis

“…This finding is consistent with research that has shown that meeting frequency alone does not necessarily lead to better performance (Shamsuddin and Alshahri, 2022;Rahman et al, 2019). For example, Shamsuddin and Alshahri (2022) found that in Oman, the number of annual meetings held is more than the Another common view is that legal and regulatory frameworks are often weak and financial markets are less developed in developing countries, making it more difficult for investors to protect themselves from fraud and other corporate misconduct (Alhababsah, 2022;Yasser et al, 2011). As a result, the importance of AC independence is higher in developing countries (Al-Araj, 2023;Shah et al, 2022).…”

“…Another common view is that legal and regulatory frameworks are often weak and financial markets are less developed in developing countries, making it more difficult for investors to protect themselves from fraud and other corporate misconduct (Alhababsah, 2022; Yasser et al ., 2011). As a result, the importance of AC independence is higher in developing countries (Al-Araj, 2023; Shah et al.…”

The Effect of Audit Committee Expertise on Audit Quality: Empirical Evidence from Bangladesh

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The Impact of Corporate Governance Practices on Non-Performing Loans in Iraqi Banks; The Moderating Effect of Concentrated Ownership

“…Boards of directors often exercise supervision through their operations committees, such as audit committees (Alhababsah, 2022;Pozzoli et al, 2022). Despite the fact that audit committees are supposed to be in charge of supervising risk management, there is no information about how the effectiveness of audit committees affects bank non-performing loans.…”