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

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Audit Committee Expertise and Earnings Management of Quoted Food and Beverages Firms in Nigeria

ThankGod C. Agwor Ph.D & Onukogu, Jane Osinachi

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Abstract

This study investigated the impact of audit committee expertise and earnings management practices of quoted food & beverages manufacturing firms in Nigeria. Secondary data were collected from the annual reports of 15 sampled firms using convenience sampling methodology which was mostly dictated by data availability. The study period covered 2006 to 2016. Earnings management was measured by discretionary accruals, using modified Jones (1991) model. Time series data was used to estimate discretionary accrual for each respective sampled firm as at 2016 financial year-end. Ordinary Least Square based regression was then applied on the cross-sectional estimates of the discretionary accruals, taking cross-section of audit committee quality dimensions (i.e. committee expertise, committee size and meeting frequency) as independent variables. Firm size was used as the contextual variable, which was measured by natural logarithm of tangible non-current assets value. It was found out that committee size was redundant due to constancy of data points, meeting frequency failed the test of statistical significance at 5% level, while the relationship between committee expertise and earnings management was not only significant at 5% level, but a negative coefficient of 1.5 17 was observed. Also, firm size yielded a positive coefficient of 0.906. It is therefore concluded that audit committee expertise, in terms of committee expertise can restrain earnings management practices of quoted food & beverages manufacturing firms in Nigeria, and that the larger a firm gets, the greater the tendency of its managers to manage earnings. In line with the findings, it is recommended that the current practice of uniform audit committee membership qualification requirement should be reviewed, and also, peer review• mechanism of audit committees in the same industry should be encouraged and implemented vigorously and be used as a platform to set benchmarks for effective monitoring.

keywords:

Audit committee expertise, earnings management practices, Food and Beverages Firms

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