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Accounting Project Topics

Audit Committee Attributes and It’s Effect on Financial Reporting Quality of Listed Manufacturing Industries in Nigeria 2021-2022 (a Case Study of Dangote Flour Mills and Honeywell Flour Mills Nigeria Plc)

AUDIT_COMMITTEE_ATTRIBUTES_AND_IT_S_EFFECT_ON_FINANCIAL_REPORTING_QUALITY_OF_LISTED_MANUFACTURING_INDUSTRIES_IN_NIGERIA_2021-2022_(A_CASE_STUDY_OF_DANGOTE

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Audit Committee Attributes and It’s Effect on Financial Reporting Quality of Listed Manufacturing Industries in Nigeria 2021-2022 (a Case Study of Dangote Flour Mills and Honeywell Flour Mills Nigeria Plc)

CHAPTER ONE

Objectivesย of theย Study

The general objective ofย theย study is to investigate the effect of audit committee characteristicsย onย corporateย financialย reportingย inย Nigeriaย consumerย goodsย sectors.ย However,ย theย specificย objectivesย are;

  1. To determine the effect of audit committee size on financial reporting quality in Nigeria consumer goods sector.
  2. To examine the impact between audit committee independence and corporate financial reporting quality in Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC.
  3. To evaluate the influence of audit committee gender on corporate financial reporting quality in Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC.
  4. To investigate the link between audit committee meeting affects and corporate financial reporting quality in Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC.

CHAPTER TWO

LITERATUREย REVIEW

Preamble

This chapter covers conceptual, theoretical and empirical reviews. Concepts underpinning the study were critically examined to arrive at suitable variables for the study.

Contending theories were alsoย reviewed to provide a suitable theoretical framework for theย study. Previous empirical studies were also reviewed to arrive at gaps in literature and provideย basisย forย discussingย theย outcomeย of this study.

Conceptualย Review

Concepts reviewed includes financial reporting quality, audit committee independence, auditย committeeย size, audit committeeย expertiseย and audit committeeย meeting.

Financialย Reportingย Quality

Financial reporting quality is defined as the faithfulness of the information conveyed by the financial reporting process (Martinez Ferrero, 2015). The word faithfulness is characterized by relevance, reliability, transparency and clarity (Jonas & Blanchet, 2000). Relevant information means that the financial statement should contain enough information useful to different users of the financial statements in assisting their decision-making process and that the information is provided in a timely fashion when they are still โ€œnewsโ€. Reliability is what assures that the information is reasonably free from error or bias and that it truly represents what it is intended to represent. Information in a financial report will be reliable to the extent that users can depend on it to judge the economic conditions or events that it purports to represent (Shehu, 2013). Transparency means that the figures truly reflect the economic activities of the enterprise during the period. Clarity is focused on how the figures are presented. The format and language of presentation is also very important. Financial reporting should therefore provide information to help investors, creditors, and other users to project the amounts and timing of future cash flows to the enterprise (Waweru & Riro, 2013).

Auditย Committeeย 

Smii (2016) describes audit committee as one of the controllable mechanisms put in place to ensure the relevance and consistency of the accounting policies adopted for the preparation of the financial statements for the organizations. The researcher adds that the presence of audit committee within the firm will help improve the transparency of the information disclosure and limit the degree of the managerโ€™s involvement in the process of the management result. Ancella (2011) sees audit committee as a committee established by the board of commissioners in order to assist the board of commissioners in carrying out their duties and functions. The researcher adds that the objective of the audit committee formation in the corporate governance structure is to increase the companyโ€™s accountability and transparency to its stakeholders by providing a more relevant and reliable financial information. Ilaboya (2012) defines audit committee as the governance body that is charge with oversight of the organizationโ€™s audit and control function. The researcher adds that it is a committee of the board of directors whose sole aim typically focuses on aspects of financial reporting on the entityโ€™s processes to manage business and financial risk, and for compliance with significant applicable legal, ethical and regulatory requirements.

 

CHAPTERย THREE

METHODOLOGY

Preambleย 

This section deals with the procedures used in data collection in line with the objectives of theย study. It shows the research design adopted for the study as well as the population, samplingย technique and sample size, method of data collection, research instrument and method of dataย analysis,ย model specification and measurement of variables.

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Researchย Design

This study adopts ex-post facto research design to investigate the effect of the audit committee characteristics on financial reporting in the Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC. This design is chosen because of its effectiveness in assessing the relationships and the effects of two or more variables the independent variable on the dependent variable. Thus, the design is consistent with the goal of this research.

CHAPTERย FOURย 

PRESENTATIONย OFย RESULTSย ANDย DATAย ANALYSIS

Preamble

Chapterย fourย coversย presentationย ofย resultsย andย dataย analysis.ย Theย dataย collectedย wereย subjectedย to descriptive and inferential statistical analyses. Means and standard deviations were computedย for all the variables of the study.ย The results of this study consist of descriptive statistics,ย correlationย analysis results and logistic regressionย results.

Descriptiveย Statistics

Descriptive statistics of the variables of the study are presented in Table 4.1 below. The minimum audit committee size is 4 members while the maximum audit committee size is 9 members. The mean score for audit committee size is 6 members. This figure is in line with the requirement of the Security and Exchange Commissionโ€™s Code of Corporate Governance in Nigeria that recommends a minimum of 6 audit committee members. The minimum audit committee independence is 25% (0.25) while the maximum audit committee independence is 63% (0.63). The mean score for audit committee independence is 48.35% (0.4835). This value is below average and it can be deduced that audit committee independence in the companies sampled is low.

CHAPTERย FIVE

ย 

SUMMARY,ย CONCLUSIONย ANDย RECOMMENDATIONS

Preambleย 

This chapter consist of the summary of the work done and summary of findings, conclusion from the findings of the study, recommendations that follows from the conclusion as well as suggestions for further studies.

Summaryย ofย theย Workย Doneย andย Summaryย ofย Findings

This study centered on the relationship between audit committee characteristics and corporate financial reporting quality in Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC. Chapter one consists of background to the study, statement of the problem, objectives of the study, Research questions, research hypotheses, Scope of the study and definition of terms. Chapter two focused conceptual,ย theoreticalย andย empiricalย reviews.

Variable examined in the study include audit committee independence, audit committee gender, audit committee meeting, audit committee size and financial reporting quality. From the empirical review, gap in literature were identified. These gaps include geographical gap, methodological gap (research design, sample size, sampling techniques, method of statistics analyses and sector) and variable exclusion (audit committee gender which is not well researched) and a new proxy for financial reporting quality, faithful representation of financial statement operationalized by Nice, (2009) which this study proceeded to fill.

5.0ย Conclusion

ย 

The influence of audit committee characteristics on financial reporting quality of companies in Nigerian consumer goods sector was investigated in this study. This research work shows that audit committee size has a positive and significant effect on financial reporting quality among listed companies in Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC Further findings shows that audit committee independence has no significant impact on financial reporting quality among listed companies in Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC. Another result of this work shows that audit committee gender has no significant influence on financial reporting quality among listed companies in Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC. The last result shows that audit committee meeting has no significant link with financial reporting quality among listed companies in Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC. It can therefore be concluded that the audit committee size of the listed companies in Dangote Flour Mills And Honeywell Flour Mills Nigeria PLC have important impact on the quality of the reporting of among listed companies in Nigerian consumer goods sector sampled for this research, whereas the audit committee independence, audit committee gender and audit committee meeting does not.

Recommendations

Basedย onย theย conclusionย ofย thisย study,ย theย followingย recommendationsย wereย drawn:

The study recommended that more non-executive directors should be included in the audit committee to improve the independence of the committee. The study also recommends that more females should be included in the audit committee to improve the audit gender diversity of the committee. The study also recommends that the committee should meet more during the year.

Suggestionย forย Furtherย Studies

Limitations of the study include limited data source and manageable size of variables. This studyย concentrated on consumer goods sector. Other sectors like Agriculture, conglomerates, financialย services,ย healthย care, ICT,ย natural resource,ย oilย and gasย andย serviceย sectorsย wereย excluded.

Further studies may focus on other sector like Agriculture, conglomerates, financial services, health care, ICT, natural resource, oil and gas and service sectors of the economy. The variables explored to represent audit committee characteristics in this research work were limited to audit committee size, audit committee independence, audit committee gender, audit committee meeting. Audit committee is part of corporate governance other variable in corporate governance are board committee characteristics, the finance, Audit & risk management committee characteristics and Remuneration/governance committee characteristics may be considered in further studies.

References

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  • Abbott,ย L.J.,ย Parker,ย S.ย &ย Peters,ย G.F.ย (2004).ย Auditย committeeย characteristicsย andย restatements,ย Auditing.ย A Journal of Practiceย and Theory, 23ย (1),ย 69-87.
  • Abdullah,ย H.,ย &ย Valentine,ย B.ย (2009).ย Fundamentalย andย ethicsย theoriesย ofย corporateย governance. Middleย Eastern Financeย and Economics, 4(4), 88-96.
  • Adeleke, D.B. (2015) Audit committee characteristics and quality of financial reports of listedย financialย institutionsย inย Nigeriaโ€™sย Journalย ofย Businessย andย Managementย (IOSR-ย JBM),23(6),59-73
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  • Dominguez-Bello, M. G., Costello, E. K., Contreras, M., Magris, M., Hidalgo, G., Fierer, N., &ย Knight, R.ย (2010). Delivery mode shapesย the acquisition and structure of the initialย microbiotaย acrossย multipleย bodyย habitatsย inย newborns. Proceedingsย ofย theย Nationalย Academyย of Sciences, 107(26), 11971-11975.
  • Donaldson, L.ย &ย Davis,ย J.ย H.ย (1991).ย Stewardshipย theoryย orย agencyย theory:ย CEOย governanceย andย shareholderย returns. Australian Journal ofย management, 16(1), 49-64.
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