The impact of audit committee effectiveness on the mandatory adoption of IFRS and the financial reporting quality: empirical evidence from an emerging market

This study aims to assess the influence of the audit committee (AC) on the correlation between the obligatory adoption of International Financial Reporting Standards (IFRS) and financial reporting quality (FRQ) in non-financial joint stock firms listed on the Saudi Stock Exchange. The analysis uses data from 111 firms to compare the period preceding IFRS implementation (before 2017) with the period following its required adoption. Accounting conservatism was employed to assess financial reporting quality. To capture the larger corporate governance environment influencing financial reporting quality, the study additionally includes Board of Directors (BD) characteristics, such as board size, independence, and experience, as key independent variables affecting the accounting conservatism as the dependent variable. The study hypotheses were evaluated using panel data models. The results show that the FRQ of the sampled enterprises has increased due to IFRS adoption. Also, the results indicate that AC effectiveness moderates the association between mandated IFRS adoption and financial reporting quality, exerting a positive influence on conditional conservatism. Furthermore, the study contributes to the existing literature by elucidating the impact of AC processes on the link between IFRS and FRQ in non-financial joint stock businesses.