Audit committee activity and internal control quality in Egypt: Does external auditor’s size matter?
Abstract
Purpose
The purpose of this paper is to examine the association between audit committee activity, external auditor’s size and internal control quality (ICQ) in the Egyptian setting. It also explores how external auditor’s size moderates the relationship between audit committee activity and ICQ.
Design/methodology/approach
To obtain relevant information about ICQ in Egypt, the authors conducted a survey among external auditors using an internal control checklist.
Findings
Results show that audit committee activity has a significant positive effect on ICQ. In addition, Big 4 auditors contribute significantly to the improvement of the ICQ in the Egyptian setting. Finally, the association between audit committee activity and ICQ is more pronounced when an organisation is audited by a Big 4 audit firm.
Originality/value
The results this paper demonstrate that Big 4 auditors play a governance role in weak legal environment as exists in Egypt by strengthening the effectiveness of audit committee meetings. The findings also have policy implications for Egyptian standard-setters and other emerging economies characterised by an under-developed and poorly regulated audit market, with respect to the development of internal auditing standards.
Keywords
Acknowledgements
The authors are indebted to the two anonymous reviewers and the editors for their helpful and detailed comments on the previous version of this manuscript.
Citation
Khlif, H. and Samaha, K. (2016), "Audit committee activity and internal control quality in Egypt: Does external auditor’s size matter?", Managerial Auditing Journal, Vol. 31 No. 3, pp. 269-289. https://doi.org/10.1108/MAJ-08-2014-1084
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited