IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 3 NO. 1 2018

---

Audit Committee Independence and Corporate Financial Reporting Quality in Aluminum Corrugating Companies in Rivers State

John Ohaka Ph.D & Tom Abio, Imaerele

---

Abstract

This study examined the relationship between Audit Committee Independence of and Corporate Financial Reporting Quality in Aluminium Corrugating Companies in Rivers State. The study dimensions of independence were used and reliability, timeliness and relevance are the measures. A total population of 70 employees was drawn from six Aluminium Corrugating companies in Rivers State and sample size of 60 was determined using Taro-Yemen statistical instrument at 0.05 level of significant. Survey design was adopted and questionnaire was used to elicit information. The instruments were validated with reliability above 0.70 co-efficient using Cronbach Alpha. Also, 60 copies of questionnaire were distributed to respondents while 55 copies of questionnaire were completed and retrieved. Hypotheses were tested using Pearson’s Product Moment Correlation Coefficient (r) and Multiple Regression Analysis (Ordinary Least Square Method) using statistical package for social sciences version. Our findings at 0.05 level of significance reveals that independence was found to have stronger relationship with reliability and a strong relationship with timeliness but moderate relationship with relevance of the surveyed Aluminium Corrugating companies. Based on our findings, we conclude with a model which shows that audit committee independence significantly relate with corporate financial reporting quality in Aluminium Corrugating companies in Rivers State. Hence, we recommend that the entire legal and regulatory framework together with the necessary institutional and environmental architecture for proper constitution and operation of an efficient audit committee should be over hauled and maintained at all times to enhance corporate governance and improve financial reporting quality of selected Aluminium Corrugating companies in Rivers State. Corporate governance regulation should be improved in order to strengthen financial reporting quality in the selected aluminium companies. Finally, regul

keywords:

Audit Committee Independence, Corporate Financial Reporting Quality, Aluminum Corrugating Companies

---

References:

Abbott, L., & Parker, S. (2000B). The effects of audit committee activity and independence
on corporate fraud. Managerial Finance, 26 (11), 55-67.

Alam, A.K. (1988). Creative accounting – is it leading us towards a stock market crash. The
cost and management, the institute of cost and management accountants of
Bangladesh Dhaka, 16(5), 14-17.

Amat, O., Blake, J., & Dowds, J. (1999). The ethics of creative accounting. Journal of
Economic Literature Classification. 41(5) 5-10.

Beasley, M .S., Carcello, J. V., Hermanson, D., &Lapides, M. C. (2000): Frudulent Financial
Reporting: consideration of industry traits and corporate governance Mechanisms.
Journal of Accounting Horizons (December): 441-454.

Bradbury, M. (1990). The incentives for voluntary audit committee formation. Journal of
Accounting and Public Policy.9(1): 13-36.

Bryan, D., Liv, M.H.C., &Tiras, S. L. (204). The influence of independent and effective
audit committee on earnings quality. Working paper, state University of New York.
Buffalo.

Cleary, S. (1999). The Relationship between Firm Investment and Financial Status. Journal
of Finance, 54(2), pp. 673-692.

Fama, E.F. (1980). Agency problems and the theory of the firm. Journal of Political
Economy.88(2): 288-307.

Galbrath, J.K. (1967). The new industrial state. Hamilton, London, united Kingdom.

Jensen, M. (1993). Modern industrial revolution, exist and failure of internal control systems.
Journal of finance. 48(3): 831-880.

Jensen, M., & Meckling, W.H. (1976). Theory of the firm: Managerial behavior, agency
costs, and ownership structure. Journal of Financial Economics. 3(1): 305-360.

Klein, A. (2002). Audit committee, board of director characteristics, and earnings
management. Journal of Accounting and Economics. 33(3): 375-400.

Klein, A. (2002). Economic determinants of audit committee independence. Accounting
Review, 77(7),435-452.

Lipe, R. (1990). The relation between stock returns and accounting earnings given
alternative information. The Accounting Review, 65, 49-71.

McDaniel, L., Martin, R. & Maines, L. (2002). Evaluating Financial Reporting Quality:
the Effects of Financial Expertise vs. Financial Literacy. The Accounting Review,
77,139-167 (Supplement).

McMullen, D.A. (1996). Audit committee performance: An investigation of the consequences
associated with audit committees. Auditing: A Journal of Practice and Theory 4
(Spring) 87-103.

Vanasco, R. (1994). The audit committee: An international perspective. Managerial
Auditing Journal, 9(8) 42 48.

Xie, B., Davidson, W. W., &DaDalt, P. J. (2003). Earning management and corporate
governance, the role of the board and audit committee. Journal of Corporate
Finance. 9(3): 295-316.

Yang, J., & Krishnan J. (2005). Audit committees and quarterly earnings management.
International Journal of Auditing. 9(3): 201-219.

Yermack, D. (1996). Higher market valuation of companies with small board of directors.
Journal of Financial Economics.40(2): 185-211.

Zhang, Y., Zhou, J., & Zhou, N. (2007). Audit committee quality, auditor independence and
internal control weaknesses. Journal of Accounting and Public Policy, 26(3): 300-
327

DOWNLOAD PDF

---

Back