Audit Committee Characteristics

Journal of Accounting Information and Innovation
Vol.5, No.11, November-2019;

ISSN (4243 – 406X);
p –ISSN 3467 – 7038
Impact factor: 5.29
EFFECT OF AUDIT COMMITTEE CHARACTERISTICS ON FINANCIAL

REPORTING QUALITY.
Ogaluzor Odinakachukwu Ifeanyichukwu and Dr John Ohaka

Rivers State University; Nigeria
Abstract: The purpose of this study is to determine whether the quality of financial reporting in consumer goods manufacturing
companies quoted in the Nigerian stock exchange is affected by the Characteristics of Audit Committee. Specifically, the study
considered the relationship between effect of Audit Committee’s independence on value relevance of accounting information and on
earnings management. It also considered the effect of audit size on value relevance of accounting information and on earnings
management. Data was collected from 15 listed consumer goods manufacturing companies. Secondary data was extracted over
eleven year-period covering from 2006 to 2016. A balanced panel data analytical approach was used since the data points consists of
equal time series for each of the cross-section of the sampled firms. Results from the analysis shows that: there is a negative but
insignificant relationship between board independence and value relevance of earnings, there is a significant positive relationship
between audit committee size and accounting value relevance of earnings, there is a significant positive relationship between board
independence and earnings management and , audit committee size is observed to have a negative relationship with earnings
management, implying that larger audit committee size constrains earning management. The study therefore, concludes that there is a
significant relationship between audit committee characteristics and quality of financial reporting of listed consumer goods
manufacturing companies. We recommend that there is need for Audit Committee to be highly independent.
Keywords: Audit Committee Characteristics, Independence, Value relevance, Earnings Management, Financial Reporting Quality
Introduction employees, suppliers, creditors, financial analysts ,

Financial Statements being a most important tool relied upon stockbrokers, management, and the government agencies –
by a wide range of stake holders for quality decision making useful in making prudent, effective and efficient decisions. The
must be prepared in the most acceptable way using the right usefulness of financial reports leans on using appropriate
standards or GAAP. It is expedient that reporting must be of standards to prepare such reports. Preparing of good reports
high quality in order to pass the right information to the user. also stems from keeping of good records which is driven by the
The ability to make effective use of financial data gives quality of the accountants and the supervision received in
investors high confidence in making business decisions. Such course of keeping the records. Audit committee serves as a
quality decisions will lead to success in their business as they good check to this. In spite of errors that may arise in course of
will be able to allocate their resources appropriately to areas financial report preparation, there might also be deliberate
where they are needed most. This will in turn lead to high level attempt to manipulate result for one reason or the other
of performance. (Jerubet, Chepng’eno & Tenai, 2017). Umoren especially where the preparer has something to gain by doing
(2009) in Jerubet, Chepng’eno & Tenai, (2017) opine that that. Despite its importance, financial information may not
accounting earning is being reported in the published financial always be credible and reliable because it may contain errors,
reports of firms, it is expected to provide a timely and reliable deliberate manipulation of accounting numbers, as well as a
input to various stakeholders, shareholders, potential investors,

Official Publication of Center for International Research Development
Double Blind Peer and Editorial Review International Referred Journal; Globally index
Available www.cird.online/JAII: E-mail: JAII@CIRD.ONLINE
pg. 1
ISSN (4243 – 406X);
p –ISSN 3467 – 7038
Impact factor: 5.29
misrepresentation of earnings, thus, question its credibility reporting quality of companies in the manufacturing sector of
(Kibiya, Ahmad & Amran, 2016). the Nigerian economy as quoted by the Nigerian stock
The companies and Allied matters act CAP 20 LFRN 2004 in exchange. Though there are several work done along this line
section 359 subsection(6) stated the functions of Audit but we have selected a special area of the manufacturing sector
Committee as follows: Subject to such other additional which is consumer goods manufacturing companies.
functions and powers that the company's articles of association Wakaba (2014) quoting Saleh, et al., (2007) attempted to
may stipulate, the objectives and functions of the audit evaluate the role of some qualities of the audit committee with
committee shall be to‐ (a) ascertain whether the accounting and regard to independence of committee members, its size, and
reporting policies of the company are in accordance with legal frequency of meetings, in addition to the experience and
requirements and agreed ethical practices; (b) review the scope knowledge which members of the committee have to monitor
and planning of audit requirements; (c) review the findings on management behavior. In line with this we will look at the
management matters in conjunction with the external auditor characteristics of Audit committees based on some of these
and departmental responses thereon; (d) keep under review the qualities. Independence and the size of the Audit committee
effectiveness of the company's system of accounting and will be used as proxies for Audit Committee Characteristics.
internal control; (e) make recommendations to the Board in Conceptual Framework for Financial Reporting (2015)
regard to the appointment, removal and remuneration of the identifies some qualitative characteristics of financial reporting.
external auditors of the company; and (f) authorise the internal “The existing Conceptual Framework identifies four
auditor to carry out investigations into any activities of the ‘enhancing qualitative characteristics’ that make financial
company which may be of interest or concern to the committee. information more useful: comparability, verifiability, timeliness
In another breath Financial Reporting Council of Nigeria Act, and understandability”. The measurement of these
2011, section 15 subsection (4) states that the functions of the characteristics will be quite difficult. Beest, Braam & Boelens
Audit Committee shall be: (a) to oversee the systems of internal (2009) gave some guides on how these qualities can be
controls regarding finance, accounting, and legal compliance; operationalized and measured quantitatively. But most
(b) to fix the fees of external auditors of the Council; (c) review researchers use earnings management (quality of accruals),
Council’s financial statements and other financial information; value relevance and others. In this work, we will use earnings
and (d) review Council compliance with other regulatory management and value relevance.
requirements. This study considers how the Audit Committee Characteristics
By this it is obvious that the entire duty of the Audit committee (Independent Variable) affects the quality of financial
rest on ensuring the preparation of a high quality report. information (Dependent Variables). Independence of the
Jerubet, Chepng’eno & Tenai (2017) affirm that Audit members of Audit Committee and the size of Audit Committee
committee of corporate board of directors has received broad- will be used to measure Audit committee characteristics while
based support for many years as a key factor for more efficient Earnings Managements and value relevance are used as the
level of corporate governance. Their major function is to proxies of the dependent variable of financial reporting quality.
oversee the process of financial reporting so as to make sure Literature Review
that all transactions are recorded accurately so as to have more Audit Committee Characteristics
reliable and accurate financial data. Committees such as the Audit committee are set up to achieve
Is the Audit Committee able to carry out this function? Do they quality financial reporting by enriching financial practices
possess the characteristics required to function effectively in within the company thereby increase earnings (Moses, Ofurum
this line? Does the financial statement of a company reflect the & Egbe, 2016; Ramsay, 2001). Audit committee is a statutorily
composition of the Audit Committee, or simply put, is the corporate governance mechanism introduced to curb financial
financial statement of a better quality because there is the reporting manipulation therefore enhanced the quality of
existence of an Audit Committee. This paper seeks to establish financial reports. However, the effectiveness of the audit
the effect of Audit Committee Characteristics on the financial committee is dependent on its attributes (Ormin, Tuta &
pg. 2
ISSN (4243 – 406X);
p –ISSN 3467 – 7038
Impact factor: 5.29
Shadrach, 2015). The effectiveness of audit committees in their financial positions and operating results (Moses, Ofurum
overseeing the financial reporting process is found to be largely & Egbe, 2016).
determined by several audit committee characteristics, The Framework for the Preparation and Presentation of
including audit committee independence, financial and Financial Statements (the ‘pre-2010 Framework’) stated that
accounting expertise (Klein 2002; Bronson et al. 2009; Carcello financial statements should be neutral; that is, free from bias,
& Neal 2003; Abbott et al. 2004; Feng 2014). Audit committee and went on to discuss the need for preparers to exercise
as a committee of the board of directors which assumes some of prudence when preparing financial statements: Financial
the board’s responsibilities is a statutory committee vested with statements are not neutral if, by the selection or presentation of
the responsibility of performing oversight function on the information, they influence the making of a decision or
financial reporting process of companies with a view to ensure judgment in order to achieve a predetermined result or
financial reporting quality. (Menon & Williams, 1996; Ormin, outcome. Prudency cautions the preparers of financial
Tuta & Shadrach, 2015) statements as they have to contend with the uncertainties that
(Ormin, Tuta & Shadrach, 2015) state that “Audit committee” inevitably surround many events and circumstances, such as the
activity level also known as audit committee diligence has two collectability of doubtful receivables, the probable useful life of
components namely audit committee meeting frequency and plant and equipment and the number of warranty claims that
attendance at meetings. Audit committee meeting frequency is may occur, to be careful to disclose such by their nature and the
concern with the number of meeting held by the committee extent to which the affect the affect the organization
during the year. Audit committee performance is associated (Conceptual Framework for Financial Reporting, 2015).
with its meeting frequency. These were measures used to Several models have been used to estimate financial reporting
determine Audit committee characteristics. Previous works quality. This is shown to be associated with user’s expectations
done by Xie, Davidson & Dadalt (2003) and Vefeas (2005) as and perceptions of what information is useful and of good
cited by (Ormin, Tuta & Shadrach, 2015) show that audit quality (Achim & Ochis, 2014). Beest, Braam & Boelens
committees which meet more frequently are associated with not (2009) identify four broad but not restrictive model often
only lower discretionary accruals but there is also a likelihood adopted in estimating financial reporting quality. These include
of reporting a smaller earnings increase by the firms. In the accrual models, value relevance models, specific elements of
case of financial reporting restatements reporting restatements, financial reports, and methods that operationalize the
Abbott, Parker & Peters (2004) found that higher levels of audit qualitative characteristics of financial reports (Ormin, Tuta &
committee activity proxy by the committee holding a minimum Shadrach, 2015). Because the managers have reporting
of four meetings in a year is positively and significantly alternatives allowed by accounting standards, they tend to
associated with lower incidence (Ormin, Tuta & Shadrach, utilize accruals which are under their control to manage
2015). earnings. Jones (1991) provided the earliest model on earnings
Financial Reporting Quality management (accrual quality) as proxy for financial reporting
Financial reporting quality represents the exactness with which quality. Subsequent modifications has been made by Dechow &
financial reporting conveys information about the firms Dichev (2002) and others (Ormin, Tuta & Shadrach, 2015).
operation in particular, its expected cash flows that informs Barth, Beaver & Landsman (2001) document the value
equity investors” (Francis et al.2005; Moses, Ofurum & Egbe, relevance model as being particularly useful to assess if
2016), they stated that abnormal accruals are a common particular accounting amounts reflect information that is used
measure of financial reporting quality. Kamaruzaman et.al. by investors in valuing firms’ equity. The model therefore
(2009) opine that financial statements should be capable of measures financial reporting quality from the stand point of
revealing relevant, reliable, comparable and comprehensive investor’s accurate valuation of the firm value based on
information. The aim of Generally Accepted Accounting information disclosed in the financial reports (Ormin, Tuta &
Principles (GAAP) compliance is to ensure that companies Shadrach, 2015). Braam & Boelens (2009) opine that value
prepare accurate financial statements that faithfully represent Relevance examines the relationship between stock returns and
pg. 3
ISSN (4243 – 406X);
p –ISSN 3467 – 7038
Impact factor: 5.29
earnings figures in order to measure the relevance and general framework for studying dynamic relationships across
reliability of financial reporting information. In their opinion, it the sampled firms. The methodology explicitly accounts for
is relatively easy to measure and Provides insight into the unobserved heterogeneity or differences across individual units
economic value of earnings figures. They further stated that its of analysis. Also the methodology enables the leverage to enjoy
advantage is that it focuses on earnings quality and is an more degree of freedom and thus increase the precision of
indirect measure of financial reporting quality providing no estimates. Generally, there are three alternative panel data
insight is in the tradeoffs between relevance and reliability. models for data analysis, namely: Pooled Regression Model
Hypotheses (PRM), Fixed Effect Model (FEM) and Random Effect Model
The following hypotheses are developed to test the relationship (REM). Each of these models has its own unique technique. In
between Audit Committee Characteristics and quality of order to avoid arbitrariness in choosing which technique to be
financial reporting in consumer goods manufacturing used, two critical tests were conducted (i.e. Hausman Test and
companies quoted in the Nigerian stock exchange. Likelihood Ratio Test).
1. Audit committee independence does not significantly The model used to test the hypotheses of the study is specified
affect earnings management of quoted manufacturing as follows:
companies in Nigeria FRQ = β0 + β1AUDSIZE + β2IND + u
2. Audit committee independence does not significantly Where β0, β1, and β2 are the population parameters and u is the
affect value relevance of quoted manufacturing error term. AUDSIZE is an independent variable that measures
companies in Nigeria audit committee size while IND is also an independent variable
3. Audit committee size does not significantly affect that measures audit committee independence. FRQ is the
earnings management of quoted manufacturing dependent variable that measures financial reporting quality,
companies in Nigeria which is proxied by value relevance of accounting earnings
4. Audit committee size does not significantly affect (VALREL) and earnings management (EM).
value relevance of quoted manufacturing companies in RESULTS
Nigeria It is uncertain whether to fit the data with pooled regression
METHODOLOGY methodology or with fixed/random effect methodology. The
The population of this study is all the quoted consumer goods pooled regression method is based on the assumptions that the
manufacturing firms in Nigeria. There are a total of twenty-two heterogeneous characteristics across the sampled manufacturing
(22) quoted consumer goods manufacturing firms according to firms average out, and is thus not significant in the analysis. If
the website page of the Nigerian Stock Exchange: the assumption holds, the relationship can be estimated using
(http://www.ngtradeonline.com/Daily/Index?sector), as at June the OLS estimation method. On the other hand, the fixed-effect
1, 2017.Judgmental sampling technique was adopted in the regression is based on the assumption that there is the existence
study due to data availability and data history sufficiency of heterogeneous characteristics. Also, the method assumes that
constraints. The sample size was determined based on the the mean of these characteristics over time for an individual is
number of the population members who have sufficient data observable; and can be separated from the actual. Lastly, the
history and can be accessible from the database of the Nigerian random-effect method assumes that the mean of heterogeneous
Stock Exchange or their respective official websites. characteristic across individuals/groups is observable and
Accordingly, a total of 15 quoted consumer goods common for each individual/group. The unobserved component
manufacturing firms constituted the sample size. Secondary of the heterogeneity (i.e. its deviation from the mean) is also
data was extracted over eleven year-period covering from 2006 assumed not to be correlated with the other explanatory
to 2016. variables; and hence can be housed in the equation error term.
A balanced panel data analytical approach was used since the In other to be certain of the most reliable form, the likelihood
data points consists of equal time series for each of the cross- ratio test is necessary. The likelihood ratio (LR) test is used to
section of the sampled firms. Besides, the panel data provide a compare the Pooled Regression Model (PRM) with the FEM.
pg. 4
ISSN (4243 – 406X);
p –ISSN 3467 – 7038
Impact factor: 5.29
The null hypothesis favours the pooled model i.e. unobserved Total panel (balanced) observations: 75
sectional differences are not significant. Furthermore, a
Hausman test is required to ascertain which, between fixed Variable Coefficient Std. Error t-Statistic Prob.
effect and Random effect is more reliable in fitting the data.
AUDSIZE 2.056990 0.149704 13.74039 0.0000
The results are presented in tables 1 and 2
IND -0.189901 0.099618 -1.906288 0.0606
Table 1: Correlated Random Effects - Hausman Test
C -0.951632 0.108194 -8.795614 0.0000
Equation: Untitled
Test cross-section random effects R-squared 0.734092 Mean dependent var 0.321945
Adjusted R-squared 0.726706 S.D. dependent var 0.261938
Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob.
S.E. of regression 0.136935 Akaike info criterion -1.099448
Cross-section Sum squared resid 1.350078 Schwarz criterion -1.006749
random 0.000000 2 1.0000 Log likelihood 44.22932 Hannan-Quinn criter. -1.062435
F-statistic 99.38537 Durbin-Watson stat 2.142734
Clearly the test statistic provides strong evidence against the Prob(F-statistic) 0.000000
null hypothesis that there is no misspecification, thereby
confirming the superiority of the Fixed Effect model over the The result of the pooled regression shows that there is a
Random Effect model. The test result to determine which negative but insignificant relationship between board
between fixed effect methodology and pooled regression independence and value relevance of earnings, implying that a
methodology is more appropriate, is presented in table 2: 1% increase in the proportion of independent non-executive
Table 2: Redundant Fixed Effect Tests Result directors will decrease the accounting value relevance of
Equation: Untitled earnings of quoted consumer goods manufacturing companies
Test cross-section fixed effects in Nigeria by 0.19%. Also, there is a significant positive
relationship between audit committee size and accounting value
Effects Test Statistic d.f. Prob. relevance of earnings. A 1% increase in the proportion of audit
committee size, relative to the board size will increase the
Cross-section F 0.000000 (14,58) 1.0000 accounting value relevance of quoted consumer goods
Cross-section Chi-square 0.000000 14 1.0000 manufacturing firms by 2.06%. Thus only audit size is
statistically significant in explaining variation in the accounting
The test evaluates the joint significance of the cross-section
value relevance at 5% level of significance. The R-square
effect using sum-of-square (F-test) and likelihood function
shows that about 73% of the variations in the dependent
(Chi-Square). The two statistic values and associated p-values
variables are explained by the explanatory variables in the
strongly fail to reject the null that the cross-section effects are
model. The Durbin-Watson statistics shows negligible presence
redundant, thereby validating the correctness of the pooled
of negativeautocorrelation. Also, F-statistics shows the
regression methodology. The result of the pooled regression are
explanatory variables are jointly significant.
presented in tables 3 and 4 where table 3 represent that of value
Similarly in table 4, the result of the pooled regression shows
relevance equation and 4, for earnings management:
that there is a significant positive relationship between board
Table 3: Pooled Regression Result (1)
independence and earnings management, implying that a 1%
Dependent Variable: VALREL
increase in the proportion of independent non-executive
Method: Panel Least Squares
directors relative to board size, will increase the earnings
Date: 06/11/18 Time: 21:34
management tendency of quoted consumer goods
Sample: 2012 2016
manufacturing companies in Nigeria by 0.55%. On the other
Periods included: 5
hand, audit committee size is observed to have a negative
Cross-sections included: 15
relationship with earnings management, implying that larger
pg. 5
ISSN (4243 – 406X);
p –ISSN 3467 – 7038
Impact factor: 5.29
audit committee size constrains earning management tendency of earnings in the consumer goods manufacturing companies in
of quoted consumer goods manufacturing companies in Nigeria, represents how the stock returns reacts on the earnings
Nigeria. A 1% increase in the proportion of audit committee of the firm. The result shows that there is negative but
membership size, relative to the board size, will insignificant relationship between independence and value
decreaseearnings management tendency of quoted consumer relevance. Therefore we accept the hypothesis which states that
goods manufacturing firms by 0.04%. there is no significant relationship between audit committee
Table 4: Pooled Regression Result (2) independence and value relevance.
Dependent Variable: EM This agrees with the work of Moses, Ofurum & Solomon
Method: Panel Least Squares (2016) in their work, Audit committee characteristics and
Date: 06/11/18 Time: 21:36
quality of financial reporting in quoted Nigerian banks, they
Sample: 2012 2016
confirmed that there is no significant relationship between
Periods included: 5
Cross-sections included: 15 Audit Committee’s independence and on earnings management.
Total panel (balanced) observations: 75 Also Ormin, Tuta & Shadrach (2015) arrived at the same
conclusion. Their paper examines the influence of the audit
Variable Coefficient Std. Error t-Statistic Prob. committee attributes of independence, meeting frequency and
attendance on the financial reporting quality of listed deposit
AUDSIZE -0.037012 0.035607 -1.039461 0.3021
money banks in Nigeria. Data was generated from the annual
IND 0.554101 0.023694 23.38547 0.0000
C -0.059227 0.025734 -2.301501 0.0243
reports and accounts of six purposively sampled banks during
the period 2003 to 2012. The data was analyzed using Pearson
R-squared 0.885509 Mean dependent var 0.116103 correlation statistics and OLS regression. The results show that
Adjusted R-squared 0.882329 S.D. dependent var 0.094947 audit committee independence has negative and significant
S.E. of regression 0.032570 Akaike info criterion -3.971671 influence on financial reporting quality of listed deposit money
Sum squared resid 0.076378 Schwarz criterion -3.878971 banks in Nigeria. This finding contradicts the findings of
Log likelihood 151.9376 Hannan-Quinn criter. -3.934657
Yadirichukwu and Ebimobowei (2013) that investigated audit
F-statistic 278.4350 Durbin-Watson stat 2.279730
committee and timeliness of financial reports empirical
Prob(F-statistic) 0.000000
evidence from Nigeria. The aims of their study was to examine
However, the observed relationship between audit size and the effect audit committee and timeliness of financial reports
earnings management failed to pass the statistical significance for thirty five (35) companies listed in the Nigerian Stock
threshold as 5% level. Thus only board independence is Exchange (NSE) for the period 2007 – 2011. Their data were
statistically significant in explaining variation in the earnings analyzed by means of germane analytical test, pooled least
management practice of consumer goods manufacturing firms square and granger causality test; their findings suggest that
in Nigeria at 5% level of significance. The R-square shows that audit committee independence is significantly associated with
about 88% of the variations in earnings management practice timelessness of financial reports. The disagreement could be as
are explained by the joint impact of audit size and board a result of statistical tools used, period of study and study scope
independence. The Durbin-Watson statistics (DW = 2.280) (Moses, Ofurum & Solomon, 2016).
shows negligible presence of negativeautocorrelation. The second hypotheses is not supported by the statistical
Similarly, the F-statistics (278.435) and the associated analysis therefore we reject the hypothesis. This is because the
probability value (PV = 0.0000) shows the explanatory test is able to establish that audit committee size significantly
variables are jointly significant. affect value relevance of earnings. This result is in agreement
Discussion of Findings with the work of Feng (2014) he states that in addition, the
The analysis of how the predictor variable, independence of the results of the standardised regression indicate that audit
audit committee, sways the response variable, value relevance committee size is also an important determinant of financial
reporting comparability. Also Wakaba (2014) is in support of
pg. 6
ISSN (4243 – 406X);
p –ISSN 3467 – 7038
Impact factor: 5.29
this finding. Research findings showed that audit committee Based on the analysis carried out on this work, the study
experience, committee gender diversity, audit committee size concludes that Audit Committee characteristics have effect on
and number of independent auditors has a significant effect on the quality of financial statement. Though in the work some
firm performance. Their study adopted an explanatory design. predictor variables used show negative and insignificant effect
The study was conducted in firms listed on the Nairobi in the response variables. The Independence of Audit
Securities Exchange for the period ranging from 2006 to 2011. Committee has negative and insignificant relationship with
Hypothesis 3 is also rejected because the result shows that there value relevance and again audit size has negative relationship
is a significant relationship between audit independence and with earnings management. The implication of this is that the
earnings management. (Wakaba, 2014, Feng 2014, Kusnadi, committee’s independence will not affect the value relevance of
Leong, Suwardy & Wang, 2015) support this finding. They financial information significantly. Again the size of the board
affirm that independence of audit committee improves the does not matter in earnings management, though its
quality of financial reports. However the work contracts the independent matters. The implication is that even if we have a
findings of Jerubet, Chepng’eno & Tenai (2017) whose finding large audit committee so long as they are not independent,
shows that audit committee independence had a negative and earning managements through discretionary accruals will be
significant effect on the quality of financial reporting. In their high. Audit committee size influences value relevance of audit
work Explanatory research design was used. A survey of all information and audit independence affects significantly
firms was done and only 46 firms were extracted because they earnings management.
were operating in NSE at the year 2014. This study utilized Recommendation
secondary data which was collected by use of a document Even though supported by many work that auditor committee’s
analysis guide. Data collected was analyzed by using both independence does not significantly affect value relevance of
descriptive and inferential statistical methods. the financial report, it is still surprising to the researchers,
The size of the audit committee fails to show a significant therefore we recommend that a more detailed work should be
relationship quality of audit report. It is so because if the audit done on this area using the whole quoted companies in the
committee is not independent, no matter the number they have Nigerian stock exchange. Again audit committee’s
in the board, they can sway the report to their own way. This independence should be increased to achieve less income
might be as a result of vested interest or influence of the smoothing.
management on the committee. This supports the work of Reference
Salihi & Jibril (2015) the audit committee the size and earnings
management in Nigerian consumer industries companies. A Abbott, L. J., S. Parker, and Peters G. F. (2004). Audit
total of 29 companies in the consumer sector of the Nigerian committee characteristics and restatements. Auditing: A
stock exchange were analyzed using multiple linear Journal of Practice & Theory 23 (1):69-87.
regressions. Data was obtained from secondary sources alone
using annual report and account of the companies for the Beest, F. V. Braam, G. & Boelens, S. (2009). Quality of
periods of 2010 to 2013. The results show that audit committee Financial Reporting: measuring qualitative
the size is negatively and significantly affects earnings characteristics. Nijmegen Center for Economics (NiCE)
management, the result further suggests that larger board is not Institute for Management Research Radboud University
efficient to minimize the tendency of managing earnings. Nijmegen: NiCE Working Paper, (pp. 09-108). Retrieved
Again, it varies with the findings of Jerubet, Chepng’eno & from
Tenai (2017). The established that audit committee size has a https://www.researchgate.net/publication/254877109_
positive and significant effect on the quality of financial Quality_of_financial_reporting_measuring_qualitative_c
reporting. haracteristics
Conclusion

pg. 7
ISSN (4243 – 406X);
p –ISSN 3467 – 7038
Impact factor: 5.29
Bronson, S. N., J. V. Carcello, C. W. Hollingsworth, & T. L. Jerubet, Chepng’eno & Tenai, (2017). Effects of audit
Neal. 2009. Are fully independent audit committees committee characteristics On quality of financial
really necessary? Journal of Accounting and Public reporting among firms Listed in Nairobi securities
Policy 28(4), 265-280. exchange, Kenya. International Journal of Economics,
Commerce and Management, V(1), 553-569.
Carcello, J. V., and T. L. Neal. 2003. Audit committee
characteristics and auditor dismissals following “new” Jones, J. (1991). Earnings management during import relief
going-concern reports. The Accounting Review 78(1), investigations. Journal of Accounting Research 29(2)
95-117. 193-228.
Companies And Allied Matters Act chapter C20 laws of the Juhmani, O. I. (2017). The Impact of Audit Committee
federal republic of Nigeria (2004). Retrieved from Characteristics on Earnings Management in the Pre- and
https://www.lawyard.ng/wpcontent/uploads/2015/11/CO Post- Bahraini Corporate Governance Code 2011. Asian
MPANIES-AND-ALLIED-MATTERS-ACT-2004.pdf Journal of Economics, Business and Accounting, 4(3), 1-
12.
Dechow, P. & Dichev, I. (2002). The quality of accruals
earnings: The role of accrual estimation errors. The Klein, A. 1998. Firm Performance and Board Committee
Accounting Review, 6(4), 643-655. Structure. The Journal of Law and Economics 41(1):275-
304.
Fakhari, H. & Pitenoei, Y. R. (2017). The Impact of Audit
Committee and its Characteristics on the Firms’ Kabiya, M. U., Ahmad, A. C. & Amran, N. A. (2016, August).
Information Environment. Iranian Journal of Audit committee characteristics and financial reporting
Management Studies (IJMS), 10(3), 577-608 quality: Nigerian non-financial listed firms. The
European proceedings of social and behavioural
Feng, Z (2014) Audit Committee Characteristics and Financial sciences. International Soft Science Conference
Reporting Comparability. Macquarie University http://dx.doi.org/10.15405/epsbs.2016.08.106
Australia.
Kusnadi, Y. Leong, K. S. Suwardy, T. & Wang, J. (2015).
Francis, J., Lafond, R., Olsson, P. and Schipper, K. (2005). The Audit Committees and Financial Reporting Quality in
market pricing of accrual quality. Journal of Accounting Singapore. European Accounting Association 38th
and Economics 39(2), 295-327. Annual Congress, 28-30 April 2015. Research
Collection School of Accountancy. Retrieved from
Hassan, S. U. (2013). Financial Reporting Quality, Does http://ink.library.smu.edu.sg/soa_research/1381
Monitoring Characteristics Matter? An empirical
analysis of Nigerian manufacturing sector. The Business Madawaki, A. (2012). Audit committee characteristics and
& Management Review, 3(2), 147-161 financial reporting quality: evidence from nigerian listed
companies. (Master Thesis). Universiti Utara Malaysia
IASB (2015). Basis for conclusions on the exposure draft
conceptual framework for financial reporting. Menon, K. & Williams, J.D. (1996). The use of audit
http://www.ctcp.gov.co/_files/documents/1522788672- committee for monitoring. Journal of Accounting and
5065.pdf Public Policy, 13, 121-139.

pg. 8
ISSN (4243 – 406X);
p –ISSN 3467 – 7038
Impact factor: 5.29
Moses, T. Ofurum, C. O. & Egbe, S. (2016). Audit committee Salihi, A. A. Jibril, R. S. (2015). The Effect of Board the Size
characteristics and quality of financial reporting in and Audit Committee the Size on Earnings Management
quoted Nigerian banks. International Journal of in Nigerian Consumer Industries Companies.
Advanced Academic Research | Social & Management International Journal of Innovative Research &
Sciences, 2(5), 1-10 Development, 51(3), 84-91.
Ormin, K., Tuta, B. I. & Shadrach, 2015, Audit Committee Xie, B., Davidson, I. W. N. & Dadalt, P. J. (2003). Earnings
Independence, Meeting Frequency, Attendance and management and corporate governance: The role of the
Financial Reporting Quality of Listed Deposit Money board and the audit committee. Journal of Corporate
Banks in Nigeria. Research Journal of Finance and Finance, 9, 295-316.
Accounting, 6(18), 183 - 190
Wakaba, R. (2014). Effect of audit committee characteristics on
Ramsay, I. (2001). Independence of Australian Company financial performance of companies listed at the Nairobi
Auditors: Review of Current Australian Requirements securities exchange (Master Dissertation). University of
and Proposals for Reform. Commonwealth of Nairobi
Australian, Camberra ACT

pg. 9

Audit Committee Characteristics

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Audit Committee Characteristics

Uploaded by

Copyright:

Available Formats

Journal of Accounting Information and Innovation

Vol.5, No.11, November-2019;

EFFECT OF AUDIT COMMITTEE CHARACTERISTICS ON FINANCIAL

Ogaluzor Odinakachukwu Ifeanyichukwu and Dr John Ohaka

Introduction employees, suppliers, creditors, financial analysts ,

Journal of Accounting Information and Innovation

Journal of Accounting Information and Innovation

Journal of Accounting Information and Innovation

Journal of Accounting Information and Innovation

You might also like