Financial Decision-Making as a Moderator between Corporate Governance, Audit Quality, and Financial Reporting Quality

The study aimed to investigate the influence of corporate governance mechanisms and audit quality on financial reporting quality with the moderating effect of financial decisions in the Saudi Arabian non-financial sector. For this purpose, longitudinal data were collected from annual reports of Saudi Arabian non-financial companies from 2018 to 2024. The regression results revealed that board size, gender diversity, board independence, directors’ expertise, audit committee effectiveness, and audit quality significantly and positively influence FRQ. Furthermore, the results indicate that financial leverage, as a measurement of financing decisions, negatively moderates the relationship between governance mechanisms and FRQ, suggesting that excessive reliance on debt financing can weaken governance effectiveness. However, financial leverage positively moderates the association between audit quality and FRQ, implying that prudent financial policies strengthen the monitoring role of auditors and improve reporting integrity. The study's theoretical contributions to agency, resource dependence, and stakeholder theories by showing how governance mechanisms interact with financing structures to shape reporting outcomes in an emerging market context. Practically, the findings provide actionable insights for firms and policymakers, emphasizing the need to optimize board structures, promote gender diversity, enhance independence, and engage high-quality auditors while aligning financing strategies with governance frameworks. By integrating sound governance with prudent financial decision-making, Saudi non-financial firms can raise transparency, enhance investor trust, and accelerate their integration into global capital markets.

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