Corporate Governance and Audit Qualifications: Empirical Study from Saudi Arabia and Oman

Since last decade corporate governance has been the focus of many studies worldwide. This stems from the belief that the better governance of the firms lead to more healthy
corporations. Prior studies investigated many issues that could be affected by corporate governance of the firms such as performance, earnings management, transparency and
disclosure. The current study will contribute to the growing literature in this field of study and mainly focusing on the impact of corporate governance on audit qualifications in Gulf countries, specifically, Oman and Saudi Arabia. The notion behind corporate governance could be extended also to study its impact on the role of auditor. The audit report is considered as a signal to the users of financial information disseminated in that report. Therefore, some argue that occurrence of audit qualifications is directly related to audit quality. In such a way the incentives that may motivate the auditor to express his opinion in a qualified manner could vary. However, it is contended that good corporate governance would lead to enhance the auditor role and mitigate the pressure on him by management and thus he will be more likely to issue a qualified opinion whenever certain
circumstances exist. As many studies investigated the issue in different counties, this study will examine the impact of corporate governance mechanisms namely, independence, CEO duality, Board size, board meeting, audit committee independence and meeting on audit qualifications following the enactment the code of corporate governance in 2003 in Oman and in 2006 for Saudi listed firms. This result of study shows that corporate governance mechanisms have no impact on audit qualifications accept for the board size which shows that audit qualifications and board size are
associated negatively. The results of study revealed that corporate governance in Gulf countries is a matter of illusion and the efforts should be directed towards enhancing the corporate governance in order to grasp the benefits behind the enactment of corporate governance worldwide.