International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue XII, December 2021 | ISSN 2454–6186

Audit Committee and Financial Performance of Listed Firms in Nigeria

Umoh-Daniel¹, Beauty Ekiomado Eguasa (Ph.D)², & Best-Okwu, Excellence^3
1Department of Accounting, Faculty of Social and Management Sciences, Benson Idahosa University
^2,3Department of Accounting, Faculty of Social and Management Sciences, Benson Idahosa University

Abstract: The broad objective of this study is to examine the impact of Audit Committee (AC) characteristics on the financial performance of listed consumer goods companies in Nigeria. The research sample comprises of eighteen (18) consumer goods companies and secondary data was generated from the annual accounts and reports which spanned from 2010 – 2019 financial years. Using the panel regression analysis; the study found that frequency of AC meetings, independence of AC and AC size have significant effect on financial performance. The study concluded that the presence of audit committee is vital in companies. The study therefore recommended that compliance with respect to audit committee size, meetings and independence should be adequately checked to ensure conformity.

Keywords: Audit Committee characteristics, financial performance

I. INTRODUCTION

The Audit Committee (AC) is a central element of corporate monitoring which can enhance the quality of financial reporting through open, candid communication and working relationship with the company’s board of directors, internal auditors and external auditors (Mustafa, 2012). Undeniably, the existence of an appropriately constituted Audit Committees is now a necessity for all listed companies in Nigeria (Corporate Governance Code, 2010) with corporate governance regulation placing significant importance on the role of Audit committee. Audit committees (AC) have been widely recommended around the world as an important mechanism for improving the quality of the company’s financial reports (Blue Ribbon Committee, 1999). AC is an important and necessary monitoring mechanism widely used in worldwide corporate organizations to monitor the financial reporting process and strengthen corporate governance (Wallace, 2003). Enofe, Aronmwan and Abadua (2013) posit that in order to improve the quality of financial statements, the Audit Committee was constituted. In recent times, the AC responsibilities have become cumbersome amid growing expectation for the AC to play a greater role as the ultimate guardian of investor’s interests and ensure corporate financial performance (Atrill, 2006).