The role of audit committee characteristics in improving the risk disclosure of companies examining the moderating role of audit quality

Abstract

This paper examines the association between audit committee characteristics (ACC) and risk disclosure (RD) of frms, focusing on the moderating efect of audit quality (AQ). The importance of RD to investors and stakeholders is that such a practice ofers a better evaluation of the overall risk profle of companies. Based on agency theory com‑ plemented by the resource dependence theory, this paper therefore suggests that efective audit committees have an efect of reducing information asymmetry while increasing audit quality monitoring capacities and consequently enhance risk disclosure practices. In this respect, the literature sources were reviewed, and a hypothetical framework was developed to test the hypotheses. The sample selection comprises 54 companies with non-fnancial companies listed in the Egyptian Exchange Market, EGX100, for the period 2018 to 2021, which amounts to 216 observations. According to the results, ACC, such as size and fnancial expertise, are signifcant for RD, while ACC relating to meet‑ ings and independence are less important for RD. The study further established that AQ moderates the relationship between ACC and RD, implying that the signifcant infuence of ACC is stronger when AQ is high. These inferences are of essence to policy makers and companies in understanding the implication of ACC on RD and the relation to highquality audits in improving the efectiveness of audit committees. It underlines the importance of audit committees in giving assurance about transparency and accountability in fnancial reporting.