Abstract

Hussaini Bala and Dr. Gugong, Benjamin Kumai

The relationship between Audit Committee characteristics and earnings quality is imperative. The mix of opinions makes the direction of their relationship ambiguous. This study investigated the relationship between Audit Committee characteristics and earnings quality of listed food and beverages Firms in Nigeria. The study covered the period of six years from 2007 to 2014. Data for the study were extracted from the Firms’ annual reports and accounts. After running the OLS regression, a robustness test was conducted for validity of statistical inferences. The dependent variable was generated using two steps regression in order to determine the discretionary accrual of the sample Firms. Multiple regression was employed to run the data of the study using OLS. The results from the analysis revealed significant association between audit committee characteristics and earnings quality of the Firms. While audit committee size and committees’ financial expertise showed inverse relationship with earnings management, committee’s independence and frequency of meetings are positively and significantly related to earnings management. In line with the findings, the study recommended among others that listed food and beverages Firms in Nigeria should strictly comply with the provision of Companies and Allied Matters Act (CAMA) and SEC Code of Corporate Governance on the issues regarding Audit Committees of having six members, equally represented by three shareholders and three directors. However, regulators such as SEC should increase the minimum number of Audit Committee members with financial expertise and they should also have a statutory position on the maximum number of Audit Committees meetings, which should not be greater than four meetings in a year as SEC code of corporate governance is silent on this. The study is only limited to the domain of the listed Food and Beverages Firms in Nigeria. As such, our findings and recommendations are only applicable to listed Food and Beverages Firms in Nigeria. For that, further research may be needed to be conducted on the audit committee attributes in other sectors other than manufacturing like financial institution.