EFFECTS OF AUDIT COMMITTEE CHARACTERISTICS ON EARNINGS QUALITY OF LISTED CEMENT FIRMS IN NIGERIA

Abstract

This study examines the effect of audit committee characteristics on earnings quality of listed cement firms in Nigeria for the period of 2013 to 2022. This study adopts ex-post- facto research design. The study population is the four cement companies listed on the Nigerian Exchange Group for the period of 2013-2022, these four companies form the sample size for this study. Secondary data were collected from financial statements of four listed cement companies listed on the Nigeria Exchange Group for the period of 2013 to 2022. Panel regression analysis was used to analyse the hypotheses with reference to Hausman test to determine whether to use fixed or random effect using E-view. Based on Hausman test, fixed effect regression was adopted for the study. This study found that audit committee number of meetings, audit committee independence and audit committee financial expertise have significant positive effect on discretional accruals, while audit committee size have insignificant negative effect on discretional accruals of listed cement companies in Nigeria. The study concludes that audit committee number of meetings, audit committee independence and audit committee financial expertise have significant positive effect on earnings quality of listed cement companies in Nigeria, while audit committee size has insignificant negative effect on earnings quality of listed cement companies in Nigeria. Based on the findings and conclusion, the study recommends that audit committee number of six (6) as it is stipulated by Securities and Exchange Commission should be maintained and stringently enshrined by listed cement companies in Nigeria as it is found by this study that audit committee size has not encouraged earnings management of listed cement companies in Nigeria. In addition, the number of outside independent members of the audit committee stipulate by Securities and Exchange Commission should be maintained and stringently enshrined by listed cement companies in Nigeria as it is found by this study that audit committee independence has encouraged earnings management. Again, the number of times the audit committee of listed cement companies in Nigeria meets in a year should be maintained as it has a positive influence on their discretional accruals. Lastly, audit committee members should be selected based on their knowledge of accounting and finance as it is found by this study that audit committee financial expertise has encouraged earnings management.

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