Effect of Audit Committees in

Listed Oil and gas Firms in

Nigeria: A case Study of Conoil
Nigeria PLC (2015-2020)
A Research Project Proposal
By
Joanna Oghenetega Irokaba
Chapter
One
Background to the Study
• Nigeria has been producing oil for over six decades
• Year 2000 oil production was approximately 1,681.66 billion scf
• Plan to increase oil production by NNPC failed due to insecurities
• EIA says Nigeria’s oil production is low at 1,775,940 barrels
• Revenue from oil makes up most part of Nigeria's income
• Emphasis placed on oil and oil production piques the interest of many individuals
• Issue of accountability comes to play to trace fraudulent activities back to the actors behind
the scene
• Accountability is important specifically in the administrative and accounting aspects of the
industry
• To promote transparency and accountability and improve trust worthiness, corporate
governance measures such as the audit committee have been placed as a requirement
 Statement of the Problem
• A common problem in the country is corruption. It plagues this
industry and the firms operating within
• The Nigerian Extractive Industries Transparency Institute (NEITI) was
one means of addressing the lack of accountability in the industry
• When a company gets caught up in a corruption scandal like in the
case of Shell and Eni in 2011, this creates negative goodwill for the
company as well as impeding on the financial performance of the
company
• The audit committee then becomes a necessary part of organizational
structure in situations like these
 Research Objectives, Questions, and
Hypotheses
• Objectives
Examine the extent to which independence of audit committee affects the financial performance of oil and gas firms
Examine the extent to which the composition of the audit committee affects the financial performance of oil and gas firms
Examine the extent to which audit committee members’ competence affects the financial performance of oil and gas
firms.
Questions
To what extent does the independence of the audit committee affect financial performance of oil and gas firms?
To what extent does the composition of the audit committee affect financial performance of oil and gas firms?
To what extent does the audit committee members’ competence affect financial performance of oil and gas firms?
Hypotheses
Ho1: There is no significant relationship between audit committee independence and the financial performance of oil and
gas firms.
Ho2: There is no significant relationship between audit committee composition and financial performance of oil and gas
firms.
Ho3: There is no significant relationship between audit committee members’ competence and financial performance of oil
and gas firms.
 Significance of Study, Scope and Limitation
of the Study
Significance
• Companies within the oil and gas industry , researchers and students
Scope
• Audit committees
• Oil and gas industry
• Conoil Nigeria PLC (2015-2020)
Limitation
• Time constraint
• Limited time coverage
Definition of Terms
• Audit committee: oversees financial reporting and disclosure
processes
• Financial performance: general measure of company’s financial health
• Oil and gas company: entity engaging in up and down stream
activities
• Oil and gas industry: petroleum industry, includes global processes of
up and down stream activities
Chapter
Two
 Conceptual Review
Explains the independent and dependent variables
Audit Committees
• Large number of collapses due to fraudulent activities destroyed public confidence
• AC introduced by CAMA S.404 (2,3,4 & 5) amended. Auditor reports to the committee
• Consists of five members, two NEDs
• Examine auditors report
• Financial literacy
AC also mentioned in the code of corporate governance. Assessing the independence and
qualifications of auditors
Abdullah, Ahmad and Adel: AC is a mechanism for corporate governance that ensures
proper management in an organization as it exposes legitimacy of its financial reports and
performance
 Conceptual review
• Components of Audit committee
Independence: measured as percentage of independent directors over total
number of members in an AC. CAMA defines independent directors. Code of
CG requires NEDs and Independent NEDs
Composition: CAMA states five members, at least two are NEDs
Competence: CAMA requires financial literacy, one member belongs to a
professional accounting body. Code of CG requires AC members be financially
literate, read and understand financial statements. Ask the right questions
Financial Performance
• Analysis must be holistic.
• Ask questions: what the financial position of the firm is?
• Two measures: accounting and market based
Empirical Review
• 27 works were used
• Spanned across various industries and company types
• Literature gap
Chapter
Three
Methodology
• Research design
• Dependent variable and proxies, independent and proxies
• Method of data collection and analysis: sample, period
• Measurement of variables: FP, ACI, ACOMP, ACC