International Journal of Advanced and Applied Sciences, 5(8) 2018, Pages: 72-90 Contents lists available at Science-Gate International Journal of Advanced and Applied Sciences Journal homepage: http://www.science-gate.com/IJAAS.html 72 Internal corporate governance mechanisms and audit quality: Evidence from GCC region Waddah Kamal Hassan 1, *, Khaled Salmen Aljaaidi 2 , Shamharir Bin Abidin 3 , Abdullah Masood Nasser 1 1 Department of Accounting, College of Business Administration, Northern Border University, Arar, Saudi Arabia 2 Accounting Department, College of Business Administration, Prince Sattam bin Abdulaziz University and Hadhramout University, Al-Kharj, Saudi Arabia 3 School of Accountancy, UUM College of Business, Universiti Utara Malaysia, Kedah, Malaysia ARTICLE INFO ABSTRACT Article history: Received 13 March 2018 Received in revised form 26 May 2018 Accepted 3 June 2018 Using the suggestions of agency theory alone for predicting the auditor change behavior in the context of GCC countries is inappropriate because they were developed in countries with mature market-oriented economies. In this study, we examine the association of board of directors effectiveness (board of directors independence, size, financial expertise, meetings, nationality, international experience and CEO duality) and audit committee effectiveness (audit committee independence, size, financial expertise, meetings, nationality and international experience) with the incidence of auditor change among Gulf Cooperation Council (GCC) public listed companies for the period 2005-2010. We posit that using an integration framework of agency theory, managerial grid theory, and attraction- selection-attrition has more explanatory power to predict auditor change behavior in GCC setting, taking into account economic and behavioral issues. The results show that only board of directors' effectiveness is significantly associated with the incidence of auditor change. This study finds out that the economic and the behavioral activities are related to the audit demand in the GCC. Moreover, the study suggests that regulators, especially GCC stock exchanges, should force companies to disclose all relevant information related to auditor change in a transparent and timely manner, and increase law enforcement to enhance good corporate governance practices. For companies, this study proposes that they should put more emphasis on enhancing the role and the quality of the board of directors and audit committee members, as they are involved in the decision of auditor change. Keywords: Board effectiveness Audit committee effectiveness Auditor change Gulf cooperation council © 2018 The Authors. Published by IASE. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). 1. Introduction * Although the recent institutional changes in GCC region would place an increasing demand for audit services, some concerns about the audit function still exist. Six audit failures have occurred (one in Kuwait, two in Oman, and three in Bahrain) and few qualified audit reports have been received in the entire history of the GCC. In particular, the Big 4 audit firms have been involved in two cases (Al-Shammari et al., 2008; Asiri, 2008). Al-Shammari et al. (2008) argued that the low number of reported audit failures in the GCC does not reflect a good audit function. Rather, Al-Gahtani (2005) argued that the accounting and auditing professions are still under development in * Corresponding Author. Email Address: waddahkam@yahoo.com (W. K. Hassan) https://doi.org/10.21833/ijaas.2018.08.010 2313-626X/© 2018 The Authors. Published by IASE. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) terms of presence and enforcement. The audit function, at this point, is concerned only with issues related to recording financial transactions, keeping source documents, preparing financial statements, and auditing financial statements by licensed auditors. The current corporate governance frameworks of GCC countries do not meet the threshold sought by international investors (Gulfbase, 2009). Corporate governance reform is often investor-driven in more developed markets, but in the GCC, the burden of corporate governance improvements falls on the regulators. Much of this stems from a combination of facts such as the ownership structures of GCC companies, the ready availability of liquidity and financing from regional banks, and the relatively underdeveloped capital markets. Arab firms still tend to have concentrated ownership, so generational ties and family involvement often affects governance relations and agreements. International investors, who take corporate