Audit committee characteristics and financial reporting quality in Nigeria

Abstract

This study examined audit committee characteristics on the quality of financial reporting of selected quoted non – financial companies in Nigeria while specifically it looked into the trend of audit committee characteristics; challenges confronting audit committee effectiveness; effect of audit committee characteristics on the financial reporting quality and contributions of the management and internal audit to audit committee’s effectiveness in performing its oversight functions. The study relied on primary and secondary data. The primary data were sourced through the administration of 300 structured pre-tested questionnaire, which were purposively administered equally on audit committee chairmen, audit committee members, chief financial officers, internal auditors, external auditors and financial analysts. Secondary data were also sourced from audited financial reports of the 54 sampled companies on variables such as financial reporting quality, audit committee members accounting expertise, director member of audit committee, audit committee meetings, board accounting expertise, board independence, board meeting, board size and audit market. The data were analysed using descriptive statistics such as mean, percentages, graphs and inferential statistics such as correlation and regression analysis. The study found that in absolute terms the trend of audit committee characteristics in Nigeria has been on the upward trend over the sampled period, it was also found that lack of expertise, exclusion of chairperson from independent members, attitude of audit committee members, resources at the disposal of audit committees are the challenges confronting audit committee effectiveness. It was found that audit committee accounting expertise with (t= 2.22251, p-value < 0.05), audit committee director member (t= 25.84755, p-value < 0.05), and board meeting (t= 7.301439 at p-value < 0.05) were positively significant except board independence, which was negatively significant at (t= -2.320087, p-value < 0.05) The study concluded that the characteristics of audit committee members with right proportion of independent and financial expertise in membership coupled with regular attendance at meetings play significant roles in ensuring quality financial reporting in the Nigerian companies.