Audit Committee Attributes and Financial Reporting Quality of Selected Quoted Consumer Goods Firms in Nigeria

Abstract

The study investigated the effect of audit committee attributes on the quality of financial reporting among listed consumer goods firms in Nigeria. This was with a view to providing information on the relevance of audit committee attributes to the enhancement of financial reporting quality (FRQ) in Nigeria. The study adopted policeman theory to provide a richer basis to explain audit committee attributes influencing financial reporting disclosure. The study constructed an FRQ disclosure index with 93 as required by the Financial Reporting Disclosure standards issued by both international and local standard setters (IAS & IFRS). Content analysis technique was therefore used to measure FRQ as a dependent variable from the annual reports of the selected companies in line with the requirements of the index. Secondary data on audit committee attributes were also obtained from the company’s3 annual reports, the publication of the Nigeria Exchange Group (NXG) as well as the website of the companies. The study therefore used descriptive and panel data regression techniques to analyze data of 180 company observations from the sample from 2012 to 2023. The regression results exhibited that financial reporting quality is directly related to audit committee independence and size (β= 0.0796, p-value = 0.0169 and β= 0.0165, p-value = 0.0016) but inversely related to audit committee tenure (β= -0.0821, p-value = 0.0024) while audit committee meeting does not have a significant relationship with financial reporting quality (β= 0.0103, p-value = 0.6130). As regards the control variables, the results of the analysis demonstrate that firm age and financial leverage are positively related with financial reporting quality (β= 0.0060, p-value = 0.0000 and β= 0.0197, p-value = 0.0080) while firm size, return on assets, liquidity have insignificant relationship with financial reporting quality (β= 0.0450, p-value =0.5361, β= 0.0111, p-value = 0.0905; β= 0.0022, p value = 0.0811). The study concluded that audit committee attributes have the capacity to influence the financial reporting quality of listed consumer goods firms in Nigeria. The study therefore recommended that the corporate boards of listed consumer goods firms should encourage the appointment of non-executive directors into the audit committee to enhance the objectivity of the committee in taking decision in the best interests of all the stakeholders.