IIARD International Institute of Academic Research and Development

Journal of Business and African Economy (JBAE )

E-ISSN 2545-5281
P-ISSN 2695-2238
VOL. 10 NO. 4 2024
DOI: 10.56201/jbae.v10.no4.2024.pg24.56

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Audit Committee Effectiveness and Financial Reporting Quality of Listed Non-Financial Firms in Sub-Saharan Africa: The Moderating Role of Board Independence

Essien, Esitime Okon, Dr. Eno Gregory Ukpong, Prof. Nkanikpo Ibok

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Abstract

This study examined the effect of audit committee effectiveness on financial reporting quality within the context of listed non-financial firms in Sub-Saharan Africa. Drawing samples from 235 listed non-financial firms in Nigeria, South Africa, and Kenya spanning the period from 2013 to 2022, the study employed Generalized Method of Moments (GMM) step and Stepwise Regression Techniques to analyze the data. The primary objective of the study was to investigate the effect of audit committee effectiveness, including size, diligence, and financial expertise, on financial report quality, as measured by Jones Discretionary Accrual. Additionally, the study extends this objective by examining the moderating role of board independence on the relationship between audit committee attributes and financial reporting quality. The findings revealed that audit committee diligence [coef. = 0.041 (0.002)] has a positive and significant effect on financial reporting quality, suggesting that an increase in audit committee diligence will improve financial reporting quality. However, audit committee size [coef. = 0.011 (0.236)] and financial expertise[coef. = 0.003 (0.990)] exhibited insignificant effects on financial reporting quality. Moreover, the study identified board independence [coef. = 0.022 (0.001)] has a significant moderator, enhancing the impact of audit committee diligence on financial report quality. Based on these findings, the study made the following recommendations to enhance audit committee effectiveness and financial reporting quality in Sub-Saharan Africa. These include promoting active audit committee oversight through regular meetings, fostering collaboration between audit committees and boards, and ensuring a majority of independent directors to strengthen audit committee effectiveness. Additionally, the study underscored the importance of continuous monitoring and evaluation of audit committee effectiveness to address em

keywords:

Financial reporting quality, Audit committee effectiveness, Audit committee

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