Audit Committee, Board Characteristics, and Forced Auditor Switch Decisions – a Case study about Deloitte's Clients in Saudi Listed Companies

On December 1, 2014, Capital Market Authority (CMA) suspended the local unit of accountancy firm Deloitte & Touche (Deloitte) from doing auditing for Saudi corporations by June 1, 2015. This decision is based on the role of Deloitte in Mohammad Al Mojil Group (MMG) failure. This paper takes advantage of the unique setting created by this event to examine the effect of characteristics of both audit committees and the board of directors on auditor switching decisions. The sample consisted of 102 observations represent auditor change in the Saudi stock market by 2015. CMA decision is been effective from June 1, 2015. T-test of mean differences suggests that there are differences between the companies select one of Big 4 audit firms and others in terms of audit committee characteristics. In addition, the result indicates differences in terms of audit committee characteristics between companies that decided to switch either by forced or voluntary. None of the board characteristics found to be significant. Using logistic regression with which forced change is the dependent variable, add more evidence for the importance of audit committee activities, with week evidence for switching to one of Big 4 in case of forced change.