Effects of Audit Committee Characteristics on Earnings Management of Listed Consumer Goods Manufacturing Companies in Nigeria

Abstract

This study examines the effect of audit committee characteristics on earnings management among listed consumer goods manufacturing companies in Nigeria. Given the persistent concern over financial statement credibility and the role of audit committees in corporate governance, this study evaluates how audit committee size, independence, financial expertise, gender diversity, and meeting frequency influence the manipulation of reported earnings. A quantitative research design was adopted, employing panel data obtained from the audited financial reports of selected listed consumer goods firms between 2015 and 2024. Earnings management was measured using discretionary accruals, and pooled regression analysis was used to assess the impact of the independent variables on earnings management. The regression model explained approximately 75.92% (R² = 0.7592) of the variance in earnings management, with an adjusted R² of 0.6335, indicating a strong explanatory power. The findings reveal that audit committee size (ACS) and frequency of meetings (ACM) significantly influence earnings management. Specifically, while larger audit committees are positively associated with earnings management, more frequent meetings correlate with reduced earnings manipulation, suggesting that consistent engagement improves oversight. Conversely, audit committee independence (ACI), gender diversity (ACGD), and financial expertise (ACFE) showed no statistically significant effect, indicating that their mere presence or qualification may not be sufficient to curb earnings management without active participation and enforcement. The study concluded that audit committee characteristics have significant effect on earnings management of listed consumer goods manufacturing companies in Nigeria It recommends strengthening the functional capacity of audit committees beyond compliance by emphasizing active engagement and effectiveness, rather than relying solely on structural composition.