Perceptions on the impact of audit committees on financial reporting quality : evidence from Bahrain

Abstract EN

The current study aims mainly to examine perceptions of financial managers, accountants, internal auditors and others who are working in listed companies in Bahrain on the effect of audit committees, as a new phenomenon in the Bahraini environment, upon the financial reporting quality (FRQ).

To accomplish this aim, a questionnaire was developed and disseminated to a sample of 313 respondents.

In addition to descriptive statistics, non-parametric tests such as the Chi-square Test, Mann-Whitney U Test and the Kruskal-Wallis Test were used as well.

One of the main findings was that respondents‟ answers were not „equally distributed‟ among the levels of agreement for each of the 12 questions included in the questionnaire and each group of questions (four groups) as probability values were significant (p<3030).

Other findings support that the independence of audit committees may help ensuring that management is more transparent; and there is a positive relationship between audit committees formation and earning quality.

Furthermore, results of the current study are in line with prior research that revealed a positive relationship between audit committees formation and FRQ in a number of developed countries such as Canada, Australia and France.

Concerning the effect of demographic variables, the Mann-Whitney U Test clearly showed that respondents‟ gender has no impact on their perceptions.

However, Kruskal-Wallis Test showed that there are statistically significant differences in respondents‟ perceptions across the four groups of occupation (in 3 groups of questions); across the four groups of experience (in only 1 groups of questions); and across the four groups of education (in all groups of questions).

Therefore, there is a full consensus among gender groups and some consensus among occupation and experience groups on their perceptions.

The study recommended that future research is needed to investigate this issue of research in other developing countries in general and GCC countries in particular.

The study also suggested that other respondent groups such as external auditors, shareholders, regulators and members of the audit committees might be included in future research.