Diligent Effort Theory and Audit Committee Effectiveness: A Philosophical and Theoretical Framework for Corporate Financial Reporting Quality

This paper advances and formally articulates the Diligent Effort Theory (DET) as an original theoretical contribution to the corporate governance and financial reporting literature. Emerging from author’s PhD Thesis on the effect of audit committee attributes on financial reporting quality of non-financial firms listed on the Nigerian Exchange Group during the period 2014 - 2018, DET posits that audit committee effectiveness is not solely a function of structural attributes such as independence, financial expertise and size but is fundamentally mediated by the personal commitment, dedication, attentiveness, meticulousness and sustained work ethic of the individuals who constitute these committees. The paper situates DET within a positivist epistemological and objectivist ontological tradition and explicitly differentiates DET from the established theoretical landscape of agency theory, positive accounting theory, resource dependency theory, managerial hegemony theory, stewardship theory, upper echelons theory, behavioural agency theory, human capital theory and organizational commitment theory. It operationalises diligent effort through a multidimensional set of observable indicators, presents a formal conceptual model linking structural attributes, diligent effort, governance effectiveness and financial reporting quality, discusses boundary conditions that may moderate the theory's applicability and offers a balanced appraisal of potential criticisms. DET offers a behavioural complement to structuralist governance theories, with significant implications for board appointments, regulatory design, corporate governance codes and future research on governance effectiveness, organizational performance, auditing quality and total quality management.

diligent effort theory, audit committee effectiveness, financial reporting quality, corporate governance, behavioural governance, emerging markets

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