Because of the asymmetry of information between owners and managers, the board of directors plays a central role in safeguarding the interests of shareholders. Indeed, in order to minimize agency costs, the board assumes a supervisory role over the management through the approval of the company's strategy, the monitoring of the control system, and the maintenance of reliable accounting records. Given its various responsibilities, the board of directors generally delegates its oversight function to the audit committee. The audit committee can enhance the quality of the audit process by facilitating the disclosure of irregularities. One of the purposes of IR is to ensure transparency on financial and nonfinancial information, such as strategy, business models, risks and opportunities, governance, compensation, and sustainability. This increased transparency is likely to be used as a governance tool to prevent corporate opportunism.
Certain attributes of the audit committee make it more efficient to perform the above tasks in the disclosure process, leading to better information in the integrated reports. The unique assumptions regarding the effects of individual audit committee attributes on integrated reporting quality are elaborated below.
Audit committee independence and integrated reporting quality
One of the principal characteristics that can influence the audit committee's ability to supervise and monitor is its independence (Abbott et al., 2000; Bronson et al., 2009). Regulatory requirements, as well as academic requirements, emphasize the importance of this independence (King, 2009).
Li et al. (2012) noted that audit committee independence improves the credibility and quality of corporate financial and non-financial information. The ability of independent members to perform their oversight and control functions more effectively stems from the absence of relationships with internal management. For example, Zgarni et al. (2016) found that audit committee members' independence increases their involvement in ensuring the reliability of reported financials.
At the same time, Audit committee independence is expressed by the proportion of non-executive audit committee members, independence is thought to enhance the power of the audit committee in monitoring management behavior and improving the quality of financial reporting, including disclosure practices (Madi et al., 2014). Indeed, Duchin et al. (2010) suggested that a large number of independent audit committee members would improve the objectivity, reliability, and transparency of corporate financial reporting and voluntary disclosures. Taylor et al. (2011) reported a significant positive association between the existence of independent audit committee members and the level of voluntary corporate disclosure. In addition, Raimo et al. (2020) found that the independence of the audit committee allows an increase in the quality of the integrated reports provided by the company. On the other hand, Li et al. (2012); Ismail and Rahman (2011) could not find significant evidence on the association between audit committee independence and disclosure of Malaysian firms. Madi et al. (2014) add that audit committee size, independence, and multiple terms have a positive effect on integrated reporting quality. They also find that the frequency of meetings and financial expertise of the audit committee have no effect on the level of voluntary disclosure. Therefore, we introduce the following hypothesis:
There is a positive association between the audit committee independence and integrated reporting quality.
Audit committee financial expertise and integrated reporting quality
The audit committee's competences and individual members' expertise, according to existing literature, improve its efficiency (Velte, 2018). The appropriate expertise of the members of the environmental audit committee is associated with greater transparency of environmental and sustainability-related information as this committee presents a guarantor of the quality of internal control and the reliability of environmental information (Jamoussi and Jarboui, 2018).
In the same vein, Huang and Thiruvadi (2008) show that there is a substantial link between audit committee accounting expertise and fraud prevention. On the contrary, Appuhami and Tashakor (2017) found no evidence of a link between audit committee accounting expertise and the level of corporate social responsibility disclosure; similarly, Madi et al. (2014) and Othman et al. (2014) found no significant link between audit committee members' financial expertise and voluntary disclosure. Similarly, Raimo et al. (2020) found that the educational background and experience in finance of the members of the audit committees have no effect on the quality of the integrated reports.
The findings of Cohen et al. (2013) indicate that combining industry expertise with accounting competence can increase the audit committee's efficiency in monitoring the financial reporting process. According to Sultana et al. (2015), audit committee members with financial expertise, prior audit committee experience, and independence are related with shorter audit delays. On the basis of these developments, we can make the following hypothesis:
Audit committee expertise has a significant positive impact on integrated reporting quality.
Audit committee meeting frequency and the integrated reporting quality
According to Khlif and Samaha (2016), audit committee meetings improve internal control quality. In addition, Li et al. (2012) found that participating at least four audit committee meetings per year is significantly and positively connected to the level of voluntary disclosure. They argue that having audit committee meetings on a regular basis improves the committee's monitoring ability. Appuhami and Tashako (2017) investigated the link between audit committee size, frequency of meetings, committee independence, and gender diversity and voluntary corporate social responsibility disclosure. They found that audit committee size, frequency of meetings, committee independence, and gender diversity have a significant positive impact on the level of corporate social responsibility disclosure.
As previously noted, the IR's complexity requires extensive oversight and monitoring. In this regard, a higher frequency of audit committee meetings, as well as improved supervisory and monitoring functions for this body, could help to improve the quality of the process of acquiring and representing information in an integrated and quality manner. The rationale for including financial experts is to help other members understand the auditors' judgments and to discern the substance of disagreements between the external auditors and management (Mangena and Pike, 2012). Thus, audit committees that meet regularly, according to Karamanou and Vafeas (2005), have more time to efficiently perform the function of monitoring disclosure processes. In the same vein, Altawalbeh (2020) found that more audit committee meetings in a regular basis would enhance the effectiveness of the monitoring function ability to perform its monitoring function. Accordingly, the hypothesis to be empirically tested is:
There is a positive association between audit committee meeting frequency and integrated reporting quality.