Can diversity in the audit committee mitigate the risk of financial misconduct and corruption? An Overview of Saudi Arabia Regulations.

Abstract

This dissertation explores the impact of professional diversity within audit committees on mitigating financial misconduct and corruption, focusing mainly on Saudi Arabia's Regulation. Recognizing the critical role of maintaining financial integrity, this study investigates how diverse audit committee compositions might improve financial oversight and decrease unethical behaviors. The research methodology combines a review of past incidents of corporate misconduct with an analysis of the legal framework, complemented by an examination of annual reports from Saudi companies to analyze the expertise and backgrounds of audit committee members. The results indicate that a mix of financial, legal, and industrial expertise within audit committees strengthens their ability to detect and address risks associated with financial misconduct and corruption. The dissertation recommends restructuring audit committees to consist of five members: three with financial skills, one with legal qualifications, and one with industrial experience. This recommended configuration aim to enhance the committee's effectiveness in adhering to legal standards and protect financial integrity. However, acknowledging the varied nature of companies in Saudi Arabia, an exception is proposed for small companies.