Effects of Characteristics of Audit Committee on Earnings Management in Nigerian Quoted Companies
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Faculty of Management Sciences, U smanu Danfodiyo University, Sokoto
Abstract
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The aim of this study is to examine the effect of Characteristics of Audit
Committee on Eamings Management in Nigerian quoted companies. Data for the
study were sourced from annual reports of one hundred and thirty one (131)
companies quoted on the Nigerian Stock Exchange over the period of 2008 to
2014. The data were analysed using descriptive, correlation and Ordinary Least
Square (OLS). The multivariate regression technique was utilised to estimate our
model. The choice of this approach was based on the fact that our data are both
time series and cross sectional. Our findings, using the panel regression results,
indicate that each of these characteristics of audit committee, namely: audit
committee independence, audit committee frequency of meetings and audit
committee meeting attendance had a negative significant impact on eamings _
management. This implies that audit committee independence, audit commitTee
frequency of meetings and audit committee meeting attendance are useful in
reducing to the barest minimum, management's tendencies for opportunistic
behaviour to manipulate eamings. Based on these findings, the paper
recommends among others that, in order to strengthen the impact of audit
committee independence on eamings management, the number of non-executive
directors should be increased. Besides, non-executive directors should be
appointed on the basis of competence and integrity. In addition, the Securities and
Exchange Commission and the Central Bank of Nigeria should put in place a
regulation which ensures statutory position on the maximum number of meetings
to be held by audit committee members in a year. The practice whereby audit
committee members are simply there just to complete the audit committee size
without active attendance and participation at meetings should be curtailed.
Keywords
HF Commerce, HF5601 Accounting