AUDIT COMMITTEE ATTENDANCE AND EARNINGS MANAGEMENT IN NIGERIA

Musa Nura Dakata, Kamardin Hasnah, Abdul Malak Siti Seri Delima

Abstract


Purpose- The aim of this study is to examine whether frequency of audit committee meetings and attendance in audit committee are associated with accrual earnings management.

Design/methodology/approach- The sample of the study is 14 companies under the Industrial Goods sub-sector listed under the Nigerian Stock Exchange (NSE) for the years 2012-2014. Modified Jones Model (1995) was used to measure earnings management proxied by discretionary accruals.

Findings- The findings show that frequency of audit committee meetings and attendance during the meetings negatively and significantly associated with discretionary accruals.

Theoretical implications- This study extends the previous related literature by examining the association between audit committee meetings and attendance and earnings management.

Practical implications- Regulators might use the findings of the study to regulate and further control the attendance of audit committee members during audit committee meetings.

Originality/value- This paper uses agency theory to provide empirical evidence on the importance of frequent audit committee meetings and higher attendance in audit committee meetings.


Keywords


earnings management, corporate governance, audit committee meeting, audit committee attendance, discretionary accruals

Full Text:

PDF

References


Abbott, L. J., Parker, S., & Peters, G. F. (2004). Audit committee characteristics and restatements. Auditing: A Journal of Practice & Theory, 23(1), 69-87.

Abbott, L. J., Parker, Y., & Parker, S. (2000). The effects of audit committee activity and independence on corporate fraud. Managerial Finance, 26(11), 55-68.

Abbott, L. J., Parker, S., Peters, G. F., & Raghunandan, K. (2003). An empirical investigation of audit fees, non-audit fees, and audit committees. Contemporary Accounting Research, 20(2), 215-234

Abdullahi, M., Enyinna, O., & Stella, A. (2010). Transparency in corporate governance: A comparative study of Enron, USA and Cadbury PLC, Nigeria. Social Sciences. doi:10.3923/sscience.2010.471.476

Alkdai, H. K. H., & Hanefah, M. M. (2012). Audit committee characteristics and earnings management in Malaysian Shariah-compliant companies. Business and Management Review, 2(2), 52-61.

Al-Matari, Y. A., Homaid, A. A., & Alaaraj, H. (2016). The Influence of Audit Committee Effectiveness on Banks' Performance in Yemen. International Journal of Economics and Financial Issues, 6(4).

Amar, A. Ben. (2014). The effect of independence audit committee on earnings management: The case in French. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 96–102. doi:10.6007/IJARAFMS/v4-i1/544

Bédard, J., & Gendron, Y. (2010). Strengthening the financial reporting system: Can audit committees deliver?. International journal of auditing, 14(2), 174-210.

Braswell, M., Daniels, R. B., Landis, M., & Chang, C. C. A. (2012). Characteristics of diligent audit committees. Journal of Business & Economics Research (Online), 10(4), 191.

Crişan, A. R., & Fülöp, M. T. (2014). The role of the audit committee in corporate governance – Case study for a sample of companies listed on BSE and the London Stock Exchange - FTSE 100. Procedia Economics and Finance, 15(14), 1033–1041. doi:10.1016/S2212-5671(14)00666-2

DeZoort, F. T., Hermanson, D. R., Archambeault, D. S. & Reed, S. A. (2002). Audit committee effectiveness: A synthesis of the empirical audit committee literature. Journal of Accounting Literature, 38–75.

Fang, V. W., Huang, A. H., & Karpoff, J. M. (2015). Short selling and earnings management: A controlled experiment. The Journal of Finance.

Garven, S. (2015). The effects of board and audit committee characteristics on real earnings management: Do boards and audit committees play a role in its promotion or constraint?. Academy of Accounting and Financial Studies Journal, 19(1), 67.

Goodwin-Stewait, J., & Kent, P. (2006). Relation between external audit fees, audit committee characteristics and internal audit. Accounting and Finance, 46(3), 387–404. doi:10.1111/j.1467-629X.2006.00174.x

Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. L. (2006). Multivariate data analysis (Vol. 6).

Haji-Abdullah, N. M., Wan-Hussin, W. N., & Hussin, H. (2016). Audit Committee Characteristics, Financial Distress and Quality of Financial Reporting: A Descriptive Analysis. Advanced Science Letters, 22(12), 4532-4535.

Healy, P., & Wahlen, J. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365–383. doi:10.2308/acch.1999.13.4.365

Idigbe, A. (2007). A review of CAMA 1990: Issues in corporate governance audit committee and auditor independence. Nigerian Accounting Standards Board 4th Annual Corporate Financial Reporting Submit and Dinner, Lagos 14th November.

Ioualalen, L., Khemakhem, H., & Fontaine, R. (2015). The impact of audit committee characteristics on earnings management: A Canadian case study. Case Studies in Business and Management, 2(1), 78.

Jensen, M.C. & Meckling, W. H., (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.

Kent, P., Routledge, J and Stewart, J. (2010). Innate and discretionary accruals quality and corporate governance. Accounting and Finance, 50(2), 171–195.

Kim, H. J., & Yoon, S. S. (2016). The impact of corporate governance on earnings management in Korea. Malaysian Accounting Review, 7(1).

Kline, R. B. (1998). Software review: Software programs for structural equation modeling: Amos, EQS, and LISREL. Journal of psychoeducational assessment, 16(4), 343-364.

Maraghni, I., & Nekhili, M. (2014). Audit committee diligence in French companies: a question of independence or competence? Comptabilité-Contrôle-Audit, 20(2), 95-124.

Machuga, S., & Teitel, K. (2009). Board of director characteristics and earnings quality surrounding implementation of a corporate governance code in Mexico. Journal of International Accounting, Auditing and Taxation, 18(1), 1–13. doi:10.1016/j.intaccaudtax.2008.12.002

Menon, K., & Williams, J. D. (1994). The use of audit committees for monitoring. Journal of Accounting and Public Policy, 13(2), 121-139.

Miko, N.U. (2016). The Effect of Corporate Governance Mechanisms and Firm Characteristics on Earnings Management Practice among Nigerian Companies. (Doctoral thesis) School of Accountancy. Universiti Utara Malaysia

Mishra, M., & Malhotra, A. K. (2016). Audit Committee Characteristics and Earnings Management: Evidence from India. International Journal of Accounting and Financial Reporting, 6(2).

Okike, E. N. M. (2007). Corporate governance in Nigeria: The status quo. Corporate Governance, 15(2), 173–193. doi:10.1111/j.1467-8683.2007.00553.x

Pacot, L., Ruiz, K. A., & Virador, L. (2013). Fraud and control: Xerox corporation case.

Piot, C., & Kermiche, L. (2009). On the Usefulness of Audit Committees. Comptabilité-Contrôle-Audit, 15(3), 9-54.

Report on the observance of standards and codes (ROSC, 2011) Nigeria, corporate governance country assessment: Nigeria, World Bank-IMG, Washington, DC

Ronen, J., & Yaari, V. (2008). Earnings management. USA: Springer.

Sáenz González, J., & García-Meca, E. (2014). Does corporate governance influence earnings management in Latin American Markets? Journal of Business Ethics, 121, 419–440. doi:10.1007/s10551-013-1700-8

Saleh, N. M., Iskandar, T. M., & Rahmat, M. M. (2007). Audit committee characteristics and earnings management: evidence from Malaysia. Asian Review of Accounting, 15(2), 147–163. doi:10.1108/13217340710823369

Saleh, N. M., Iskandar, T. M., & Rahmat, M. M. (2005). Earnings management and board characteristics : Evidence from Malaysia. Jurnal Pengurusan, 24, 77–103.

Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 3(4), 91-102.

Soliman, M. M., & Ragab, A. A. (2014). Audit committee effectiveness , audit quality and earnings management : An empirical study of the listed companies in of the listed companies in Egypt. Research Journal of Finance and Accounting, 5(2), 155–166.

Spohr, J. (2005). Essays on earnings management.( Doctoral thesis) Swedish School of Economics and Business Administration. Helsinki, Finland

Stewart, J., & Munro, L. (2007). The impact of audit committee existence and audit committee meeting frequency on the external audit: perceptions of Australian auditors. International Journal of Auditing, 11(1), 51–69. doi:10.1111/j.1099-1123.2007.00356.x

Vafeas, N. (1999). Board meeting frequency and firm performance. Journal of Financial Economics, 53(1), 113–142. doi:10.1016/S0304-405X(99)00018-5

Watts, R. L., & Zimmerman, J. L. (1978). Towards a positive theory of the determination of accounting standards. Accounting review, 112-134.

Xie, B., Davidson, W. N., & Dadalt, P. J. (2003). Earnings management and corporate governance: the roles of the board and the audit committee. Journal of Corporate Finance, 9(3), 295-316., 9(404), 1–32.

Xiong, Y. (2006). Earnings management and its measurement: a theoretical perspective. The Journal of American Academy of Business, 9(2), 214-219.


Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.