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Attribute Of Audit Committee Members and Quality Of Financial Reporting In Banks Nigeria

ABSTRACT 

This research investigated the impact of audit committees attributes on financial reporting quality of Banks in Nigeria. Modified Jones model (1991) provided the measures of earnings quality, which were used to proxy for financial reporting quality. The audit committee attributes investigated were: independence, financial expertise, frequency of meetings, and multiple directorship.


The population of our study is all the twenty-two (22) quoted banks on the Nigerian Stock Exchange as at 31st December, 2010 filtered to eleven (11) banks considering only banks declared healthy by the CBN and having the relevant data required for the study. Secondary data were used obtained from secondary sources, i.e., annual reports and returns filed with SEC. The research design used is correlation research design.

The effectiveness of Audit committee attributes is one of the significant themes in corporate governance debates. We contribute to the debate by examining empirically whether audit committee attributes are associated with financial reporting quality in Nigerian banks. By using a measure of financial reporting quality, Jones (1991) model this study is one of the few studies that overcome the imprecision inherent in the abnormal accruals/earnings management.

We show that after controlling for bank size and bank market penetration, the percentage of audit committee members having financial expertise is positively related to financial reporting quality. We also find some evidence of a positive relationship between the independence, frequency of meeting and multiple directorship of the audit committee and financial reporting quality. We also verify that our results are robust across the measures of financial reporting quality.

Our results suggest that mandating greater expertise on audit committees rather than simply requiring one expert on the audit committee may be beneficial to investors. We equally suggested training and re-training of audit committee members to guarantee meaningful contributions


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