IMPACT OF THE AUDIT COMMITTEE ON EARNINGS MANAGEMENT IN NIGERIAN DEPOSIT MONEY BANKS

Babatunde Akinola, Peters Ade Sanni, Kemi Debbie Ogunsola

Abstract


Guaranteeing trustworthy and quality financial reporting has made audit committee a necessity in Nigerian Deposit Money Banks. However, amidst diverse cases of financial manipulations in these Banks, the effectiveness of audit committee mechanism in the quest for a dependable and high-quality financial reporting has been placed under doubt. To this end, this study investigates the impact of the audit committee on earnings management in Nigerian Deposit Money Banks. Ex-post facto research design was adopted and requisite data were derived through secondary source. Over a period of five (5) years, from 2013 to 2018, this study purposively chosen ten (10) deposit money banks that are classified under the first and second tier bank category. Ordinary Least Square regression was applied on the variable estimates and results indicated a significant negative impact of audit committee independence on the earnings management, likewise a significant positive relationship between audit committee financial expertise and earnings management of chosen deposit money banks in Nigeria. However, audit committee appears insignificant. The study concluded on a general ground that a link exists between audit committee and earnings management in chosen Deposit Money Banks in Nigeria. And thus recommended that audit committee should include more independent directors with financial expertise because the independence of the committee significantly reduces earnings management.

Keywords


Earnings Management, Audit, Audit Committee, Deposit Money Bank, Nigeria.

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