AUDIT COMMITTEES’ ATTRIBUTES AND FINANCIAL REPORTING QUALITY AMONG NIGERIAN LISTED DEPOSIT MONEY BANKS

Abstract

Financial reports give stakeholders accurate insights into a bank's financial health, performance, and prospects. The audit committee plays a pivotal role in ensuring the quality of these financial reports. There are, however, concerns about the audit committee's effectiveness in its role. This study examined the effect of Audit Committees' Attributes on the financial reporting quality of Nigerian listed Deposit Money Banks (DMBs). This study further examined the factors determining the audit committee's effectiveness, namely its size, independence, and financial expertise, and how they affect the quality of financial reports measured by the Jones' discretionary accrual model. The study employed ex-post-facto research design and the Ordinary Least Squares technique to investigate the relationship between the variables using 12 DMBs listed on the Nigerian Exchange Group as of December 2022. Findings revealed that audit committee size [coef. = -0.008 (0.051)] has a marginally significant negative effect, while the audit committee's financial expertise [coef. = 0.010 (0.002)] has a significant positive effect on the financial reporting quality of listed DMBs. These findings suggest that a large audit committee size may reduce coordination among members, leading to less effective oversight or causing a dilution of members' influence, resulting in reduced focus and accountability. The Audit Committee's independence [coef. = 0.000 (0.533)], however, does not significantly affect financial reporting quality. The study recommended that the Board should consider an optimal audit committee size and be cognizant of appointing members with proven financial expertise to the audit committee, while also maintaining the audit committee's independence to avoid a conflict of interest between management and shareholders.