Audit Committee Expertise: Does It Enhance Reporting Quality of Corporate Firms in Nigeria?

Abstract

This study looked at publicly traded companies in Nigeria's healthcare industry to see how audit committee knowledge affected financial reporting quality. Secondary data was culled from the yearly financial statements and corporate governance filings of five of the seven companies in the industry for the study, which used an ex post facto research design. We made sure there were no major compliance issues by picking these companies based on how well they followed regulatory norms. The time frame that was examined was 2019–2023. In order to evaluate the competence of the audit committee, the research zeroed attention on the members' financial literacy. At the same time, discretionary accruals were used as a stand-in for financial reporting quality, with their estimates made using the modified Jones model. This model is well-known in the field of accounting research for its ability to uncover earnings management methods. Discretionary accruals were found to be negatively correlated with audit committee expertise, according to the regression analysis. To be more precise, the data indicated a p-value of 0.0439 and a coefficient of -90,616,656. This result suggests that the level of profits manipulation lowers as the level of financial understanding among audit committee members rises. To rephrase, audit committees that have a deeper understanding of financial matters tend to generate more reliable financial reports free from the influence of subjective accounting methods. The study draws the conclusion that audit committee knowledge is critical for making financial disclosures more credible and reliable based on these findings. It stresses the need for audit committee appointments of persons with solid financial credentials and applicable work experience. Companies can strengthen their corporate governance systems and encourage more open and accountable financial reporting if they do this.