Özet:

This paper aims to explore the role of audit committees (ACs) in the Libyan banking sector (LBS) and to investigate the impact on AC practice of the sector’s recent shift to an Islamic banking system. Little is known about the role of these committees, which were only made compulsory in Libya in 2010. The findings support agency theory in that they perceived these committees as being responsible for reviewing financial statements, the internal auditing function and the external audit process. However, the perception was that ACs are not currently carrying out these responsibilities effectively; participants perceived ACs as spending too little time reviewing financial statements, rarely challenging weaknesses in the work of internal auditors and seldom following up or supervising the work of external auditors. One explanation for this state of affairs is that ACs in the LBS are primarily designed to create legitimacy outside the organisation rather than to effect radical change within it. The study also found that it is not the application of Islamic law per se that is perceived as having an adverse impact on AC practice in the LBS, but the speed at which this transition is taking place in an already weak banking environment. This research helps expand our knowledge of current AC practice as a key mechanism of corporate governance (CG) by being the first to investigate how this role is performed in Libyan banks, which are in the early stages of implementing Islamic law. The research is also important because it addresses an information gap in the accounting literature by investigating AC effectiveness in a developing country, a context which is still poorly understood.

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