Audit Committee Characteristics and Financial Reporting Quality: Evidence from Listed Deposit Money Banks on the Nigerian Exchange (NGX)
- Feb 26
- 2 min read
Authors: Khadijah Bala Ciroma
Abstract
This study examined how the audit committee characteristic affects the quality of financial reporting among deposit money banks listed on Nigerian Exchange (NGX) between 2015 and 2024. The year 2015 was selected to create a balanced ten-year panel (2015–2024), giving sufficient observations and statistical power for rolling-window and fixed-effects estimations while aligning with a period of relatively consistent NGX corporate-governance disclosures that improve comparability of audit-committee and financial data across banks. The Agency Theory was the underpinning theory for this study in regard to the three listed attributes, size of the audit committee (ACSZ) independence of the members (ACIND) and financial expertise (ACFEXP) and their impact on discretionary accruals (DA), earnings smoothness (ESM) and timely loss recognition (TLR). The study adopted the ex post facto design to conduct a census of 14 banks listed DMBs. The secondary data were based on annual report and the corporate governance disclosures on NGX archive and the investor relations sections on banks websites. The two approaches given to data analysis are that descriptive statistics and correlation matrices were used in summarizing the variables and panel data regression with the fixed effects of bank and year was employed. Results show that ACIND and ACFEXP have significant effects in decreasing DA and increasing TLR with ACIND having a small effect on improving ESM. The influence of ACSZ was lower and unable to produce any noticeable effect on ESM, TLR, or even slight decrease in DA. The research findings can be summarized by saying that independence and financial knowledge are very important in enhancing a credible financial reporting within Nigerian banks. The study therefore recommended that the NGX and the Central Bank of Nigeria should raise minimum threshold for independent directors on audit committees, ideally to at least two-thirds, to ensure impartial oversight and reduce earnings management.
Keywords: Audit Committee Characteristics, Financial Reporting Quality, Discretionary Accruals, Earnings Smoothness and Timely Loss Recognition