Internal Audit Mechanisms and Return on Assets of Quoted Firms in Nigeria

Abstract

This study examines the effect of audit committee attributes on firm performance among quoted manufacturing firms in Nigeria. Specifically, it investigates the influence of audit committee independence, size, and meeting frequency on Return on Assets (ROA). An ex post facto research design was adopted, utilizing secondary data from annual reports over the period 2020–2024. Panel regression analysis was employed to analyze the data. The findings reveal that audit committee independence has a statistically significant negative effect on firm performance, suggesting that excessive independence may constrain managerial efficiency and increase monitoring costs. Audit committee meeting frequency shows a negative but insignificant effect, indicating that the number of meetings alone does not enhance performance without effective deliberations. Similarly, audit committee size exhibits a negative and insignificant relationship with ROA, implying that larger committees may face coordination challenges. The model explains a modest proportion of variations in firm performance, although the variables are jointly significant. The study concludes that the effectiveness of audit committees depends more on functional efficiency than structural composition. It recommends a balanced approach to independence, emphasis on meeting quality, and optimal committee size.