Effect of The Board of Directors Size, Independence, and Frequency of Board Meetings on Audit Fees: Evidence From GCC Market

Abstract

Purpose: This study aims to examine the potential impact of board size, board independence, and meeting frequency on audit fees for companies listed on the financial markets of the United Arab Emirates (UAE).   Design/Methodology/Approach: The Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) are the two financial markets in the UAE. The data utilised in the investigation were obtained from the ADX and the DFM. The data was gathered over six years, from 2011 to 2016. The final sample comprises 312 observations. The study employs descriptive and correlation tests, in addition to multiple regressions, as statistical methods.   Findings: The analysis revealed a strong correlation between audit fees and both the independence and frequency of board meetings. The findings demonstrated a positive correlation between stringent corporate governance procedures and the requirement for superior audit quality, resulting in higher audit costs. The results also indicated a significant correlation between business size, profitability, leverage, and audit fees.   Originality/Value: Due to the recent implementation of the corporate governance code in the UAE and its financial markets, including the ADX and DFM, the efficacy of the code remains uncertain and, therefore, subject to scrutiny. Inadequate governance and audit standards may adversely impact the integrity of financial reporting. Nevertheless, there is limited empirical research investigating the elements influencing the quality of financial reporting in the UAE. This study contributes to the existing literature by enhancing comprehension of the impact of the board of directors on audit quality, utilising data from a GCC country.