AUDIT COMMITTEE CHARACTERISTICS AND FINANCIAL REPORTING QUALITY IN NIGERIA’S CONSUMER GOODS MANUFACTURING SECTOR
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Abstract
This study investigates the relationship between audit committee characteristics and
financial reporting quality in Nigeria’s consumer goods manufacturing sector. The
motivation for the research stems from persistent concerns about corporate governance effectiveness and the reliability of financial statements in emerging economies.
Specifically, the study examines the impact of audit committee meeting frequency,
independence, financial expertise, and size on financial reporting quality, with
discretionary accruals serving as a proxy for earnings management. The study adopts an ex-post facto research design and utilizes secondary data from listed consumer goods firms covering the period 2011–2020. Descriptive statistics, correlation analysis, and panel regression techniques were employed in analyzing the data. The results reveal that audit committee independence, financial expertise, and meeting frequency significantly reduce discretionary accruals, thereby enhancing financial reporting quality. Conversely, audit committee size does not exhibit a significant effect, indicating that effectiveness is influenced more by the quality and competence of members than by their number. The findings align with agency theory and prior empirical studies that emphasize the critical role of independent and knowledgeable audit committees in constraining earnings management. The study contributes to the literature by providing empirical evidence from Nigeria, an under-researched context, and offers practical implications for regulators and boards to strengthen audit committee structures. It recommends that emphasis should be placed on ensuring the independence, expertise, and active engagement of audit committees rather than merely meeting statutory requirements for committee size.
financial reporting quality in Nigeria’s consumer goods manufacturing sector. The
motivation for the research stems from persistent concerns about corporate governance effectiveness and the reliability of financial statements in emerging economies.
Specifically, the study examines the impact of audit committee meeting frequency,
independence, financial expertise, and size on financial reporting quality, with
discretionary accruals serving as a proxy for earnings management. The study adopts an ex-post facto research design and utilizes secondary data from listed consumer goods firms covering the period 2011–2020. Descriptive statistics, correlation analysis, and panel regression techniques were employed in analyzing the data. The results reveal that audit committee independence, financial expertise, and meeting frequency significantly reduce discretionary accruals, thereby enhancing financial reporting quality. Conversely, audit committee size does not exhibit a significant effect, indicating that effectiveness is influenced more by the quality and competence of members than by their number. The findings align with agency theory and prior empirical studies that emphasize the critical role of independent and knowledgeable audit committees in constraining earnings management. The study contributes to the literature by providing empirical evidence from Nigeria, an under-researched context, and offers practical implications for regulators and boards to strengthen audit committee structures. It recommends that emphasis should be placed on ensuring the independence, expertise, and active engagement of audit committees rather than merely meeting statutory requirements for committee size.
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