AUDIT COMMITTEE CHARACTERISTICS, BOARD CHARACTERISTICS AND FINANCIAL REPORTING QUALITY IN NIGERIA

Objective of the study is to examine the relationship between audit committee characteristics, board characteristics and financial reporting quality in the Nigerian banking sector. A sample of nine banks was selected using the simple random sampling technique. Data for the selected banks were analyzed by employing ordinary least square regression technique. The period under review is ten years. The result of the study shows there is positive relationship between audit committee meetings and financial reporting quality. The study also shows that there is a negative relationship between board composition financial reporting quality . However the study revealed that there is no significant relationship between board size, board expertise and financial reporting quality. The study recommended that Apex bank should mandate audit committee of banks to meet at least four times in an accounting year. Keyword: Audit committee, audit committee expertise, financial reporting quality, board structure, Nigeria International Journal of Economics, Commerce and Management, United Kingdom Licensed under Creative Common Page 1293 INTRODUCTION Financial reports are the most crucial components of an accounting transaction. Financial reporting is aimed at giving information to guide stakeholders’ decisions. It serves as a prospectus for potential investors and a barometer for ascertaining manager’s performance (Schipper & Vincent, 2003). Sloan (2001) opines that financial report is the first source of independent information that communicates the activities of a company to stakeholders. Base on this some scholars liken financial report to a report card that is used to assess management’s activities for an accounting year. However other scholars argued that it is unrealistic to assess managers’ performance base on the content of financial reports because they have great input in the preparation these reports. Yusoff (2010) argues that the credibility and the reliability financial report lies on integrity of those involved in its preparation (like directors and auditors). Good corporate governance is referred to as one of the most veritable tools that enhance the quality and the reliability of financial reporting in extent literature. The foregoing has made financial reporting quality a topical issue in most countries especially in the developed nations. Most the of emphasis on corporate governance is specifically placed on board characteristics (Yeo et al., 2002; Han, 2005; Beekes et al., 2004; Bradbury et al., 2006; Petra, 2007) and audit committee characteristics (Agrawal & Chadha, 2005). Most countries have formulated governance codes and mandate all companies operating within their boundaries to comply with these codes. These codes differ from one nation to another. In Nigeria, the governance code for bank was reviewed in 2010 by the apex bank. This transformation came shortly after the shaking that took place in the banking sector that rendered some banks insolvent. Sanusi (2012) and Brownbridge (1996) among others have provided anecdotal evidences of accounting choices in the Nigerian banking sector. Anecdotal evidence shows that the entire failed banks in Nigeria in the last decade had wonderful audited financial reports. Most of these banks declared huge profit but went under few months after these declarations. According to Sanusi (2012) one of the eight reasons for banking crisis in 2008 was “inadequate disclosure and transparency about financial position of banks. ” Various terminologies have been used to describe it, “inadequate disclosure and transparency” smoothing, bath accounting and creative accounting. The crises that bedeviled the financial sector post publication of audited financial reports have call for the concern of indigenous researchers. Some have argued that lack formidable audit committee is responsible for this abysmal reporting quality. Other pointed out that the chief cause for this crisis is lack activate board. This paper focuses on the impact of the board and audit committee in actualizing qualitative financial reports in the Nigerian banking sector.