1. The perception of audit committee members, internal and external auditors on the effectiveness of audit committees in Saudi Arabia

2. Ehsan Al-Moataz, Ph.D Acct Department, Umm Al-Qura University, Saudi Arabia Mohammad Al-Omiri, Ph.D Acct Department, Saudi Arabia And Andrew Higson, Ph.D Business School, Loughborough University, UK

3. Background  In recent years, the accounting profession, users of financial statements and governments have expressed concerns over the incidence of fraudulent financial reporting.  One response on the part of companies to these concerns has been the establishment of audit committees.

4. In all of the countries where they have become established, audit committees have been stimulated by unexpected company failures and/or corporate malpractices.

5.  Woodlock and Claypool (2001: 28) mentioned that once the audit committee is made aware of its current practices, a comparison needs to be made between current practices and those that constitute best practices.  Moreover, Rowland (2002) claimed that the monitoring model is manifest in actual corporate practice compared with best practice guidelines.

6. The significance of the research is its contribution to the literature in the field of audit committees’ effectiveness that characterised by the lack of studies into this area.

7. Data Collection The samples were:  audit committee members  external auditors  internal auditors.

8. The questionnaire was designed and developed by the researchers after a review of prior studies in the same field.

9. The aim of the questionnaire was to collect the data necessary to evaluate the audit committee’s effectiveness by comparison the actual practice with best practice which have been adopted according to the previous research and publishing reports by the governmental and professional bodies.

10. The main components of the questionnaire are:  Corporate governance  The role with the external auditors  The role with the internal auditors  Authority of audit committees  The literacy of audit committees  The diligence of audit committees.

11. The Results  Concerning audit committee members, the groups related to the role of audit committees with internal auditors, authorities of audit committees, and the other two statements are an area of growing concern over the role of audit committees in Saudi corporations especially since we know that this perception are from members of audit committees themselves.

12. The results relating to internal auditors demonstrate that generally these people hold audit committees in high regard and they perceive them to have high level of effectiveness in fulfilling their duties among Saudi corporations.

13. The last perception is however inconsistent with the perception of external auditors who rated the operation of the audit committees lower than the other two samples.

14.  The nature and positions of these samples might explain their perceptions toward the effectiveness.

15.  The Analysis of Variance (ANOVA) was run to investigate whether there are differences between the three samples toward evaluating audit committees.  It was found that in 18 pair comparisons, 12 comparisons (66.7%) were significant.

16.  The views of audit committee members and internal auditors were significantly different in 2 cases from 6, which represent 33.3%.  In both cases, internal auditors evaluated the two groups significantly more than audit committee members.

17.  The views of audit committee members and external auditors were significantly different in four cases from 6, represent (66.7%).  In all cases that were different, audit committee members assessed the four groups significantly more than external auditors.

18. Interestingly, in all six pair comparisons, the views of internal auditors and external auditors were significantly different. Certainly internal auditors evaluated the role of audit committees in all groups more highly than external auditors.

19.  However, audit committees in Saudi Arabia are at an “infant” stage of evolution and are “finding their feet”, in terms of developing their role within companies.

20.  The Ministry of Commerce should follow up its resolution by issuing further clarification of what corporations must do exactly to implement the role of audit committees within Saudi corporations.